Tesla Confirms Toyota Will Ditch Electric Car Partnership Later This Year

Toyota’s RAV4 EV is one of the most versatile plug-in cars on the market today, thanks in part to its Tesla-engineered battery pack and drivetrain.

Tesla's partnership with Toyota is about to end.

Tesla’s partnership with Toyota is about to end.

But come the end of this year, when Toyota reaches its mandated-by-law sales target of 2,600 units in the state of California, the Japanese automaker will end production of the plug-in SUV. And that means it will end its partnership with Tesla Motors [NASDAQ:TSLA] too.

Revealed in the Q1 earnings report made last week, Tesla has confirmed that Toyota’s reliance on it for battery packs and drivetrains for its RAV4 EV will come to an end this year.  Initially valued by Tesla CEO Elon Musk as being worth $100 million to the company, the three-year agreement between the two firms was inked in 2011, just as Tesla was preparing its Model S sedan for market.

When the agreement was first signed, it was mutually beneficial to both companies. Toyota — which had purchased $50 million in Tesla stock the year before — was able to rely on Tesla’s expertise to produce a drivetrain and battery pack for a car it was being forced to make under Californian law instead of developing the technology in-house. Tesla meanwhile, was given a line of income at a time at a point where it had yet to start Model S production but was incurring high research and development fees and rapidly expanding business costs.

In its Q1 filings, Tesla is pretty specific. “Toyota is expected to end the current RAV4 EV model this year,” it said. Yet Toyota isn’t quite as committal. In a public statement to BloombergToyota Spokesperson John Hanson said Toyota hasn’t made a decision on what comes next.

“This was a project for a specific number of vehicles that we planned to sell for a specific number of years,” he said. “We have not made any announcement about the relationship or what we’ll do with Tesla in the future.”

Tesla says Toyota will end its partnership this year. Toyota says nothing.

Tesla says Toyota will end its partnership this year. Toyota says nothing.

Yet Toyota, which is mandated by Californian law to produce a specific number of zero-emission vehicles under Californian Zero Emission vehicle (ZEV) mandates, has another ZEV qualifying car in the pipeline: the as-yet unnamed by heavily promoted hydrogen fuel-cell sedan Toyota says it will bring to market next year.

As a consequence, Toyota no longer needs an electric car in order to meet California’s ZEV requirements.

What’s more, the Toyota RAV4 EV is currently costing Toyota a lot of money, with the Japanese automaker stumping up lease deal incentives totalling more than $16,500 in an attempt to ensure enough of them are sold before the end of the year.  Add to that an historical mistrust of electric car technology on the part of Toyota — demonstrated nicely by anti-plug-in ads from its luxury brand Lexus last week — and it’s clear to see that Toyota’s near future doesn’t contain an all-electric vehicle.

Of course, the ending of the three-year deal isn’t exactly news per say: we’ve known the symbiotic Toyota-Tesla partnership on the RAV4 EV was transient in nature and would only endure as long as it was beneficial for both parties. With the goods all but delivered to Toyota and Tesla ramping up to provide batteries and power trains to Daimler for its soon-to-launch Mercedes-Benz B-Class Electric Drive, the Californian automaker won’t lose much sleep over the closing of its Toyota partnership.

But for Toyota? With less than a year to go before its hydrogen fuel cell car hits the market, no official name given and hydrogen fuel cell refuelling infrastructure far less common than even electric car charging infrastructure was when cars like the Nissan LEAF launched in 2010, we’re curious to see what happens next — and if Toyota can make good on its promises of a truly affordable, mass-market H2 car by the end of next year.

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