Toyota Ends Battery Supply Deal With Tesla To Focus On Fuel Cells

Toyota Motor Corp (ADR)(NYSE:TM) deal with Tesla Motors Inc. (NASDAQ:TSLA) for the supply of battery will end this year, and with this the Japanese automaker will shift its focus from all electric systems cars to manufacturing vehicles that run on the next generation technology of hydrogen fuel cells, the Japanese firm said on Monday. Toyota Motors acquired a 3% stake in Tesla by investing $50 million in 2010. Tesla’s Electric powertrains were carried by the crossover sport utility vehicle, Toyota’s RAV4, and the company signed a $100 million joint development deal in 2011.

RAV4 – not so impressive

Toyota Motor Corp (ADR)(NYSE:TM) introduced low cost lease and loan offers to promote the sales of electric RAV4, which did not help and it recorded poor sales. Toyota feels that the cars that run on fuel cells are the most efficient cars as far as zero emission technology is concerned. Gas electric hybrids’ biggest manufacturer in the world is Toyota.

RAV4 electric vehicles are being“re-evaluated” by Toyota and supply agreement with Tesla Motors Inc (NASDAQ:TSLA) will be concluded this year. Tesla was supposed to supply Toyota 2500 battery-electric powertrains for the RAV4 as per the contract.

Toyota shifting focus

Toyota Motor Corp (ADR)(NYSE:TM), the Japanese car maker said that this year it would focus on creating a hydrogen fuel cells powered car-a four door sedan, which will be introduced in California by next year. Fuel cell technology needs support of hydrogen, and therefore the company would also focus on developing refuelling stations.

On Friday, Tesla Motors Inc. (NASDAQ:TSLA) mentioned in a regulatory filing that it expect the supply deal to end this year. As of now, Toyota is interested in keeping its stake in Tesla.

“It’s obvious Toyota doesn’t see a market for electric vehicles,” said John O’Dell, green-car analyst at the auto-research site “They really see the future of the zero-emission vehicle as the hydrogen vehicle,” he said.

In May 2010, the two automakers entered into a partnership with the purchase of an assembly plant by Tesla Motors Inc. (NASDAQ:TSLA) in Fremont, California, which was closed down by Toyota.