Tesla Motors Inc And Toyota To End Battery Deal

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) may no longer supply battery packs and motors for Toyota for the electric RAV4. Bloomberg news cited a corporate filing indicating the end of arrangements between the companies.

“Toyota is expected to end the current RAV4 EV model this year,” Bloomberg quotes Tesla as saying in its quarterly filing Friday. It says the deal was worth $15.1 million.

Toyota needs another EV

Even though demand for the Toyota RAV 4 is not very high, it has approximately same power plant as the Tesla Motors Inc (NASDAQ:TSLA) Model S for half of the cost. The price of the electric RAV4 is around $50,000. Toyota wants to discontinue this agreement early because the cross-over has not been very popular due to higher costs and the relative lack of battery-charging stations throughout the United States. In California, however, Toyota managed to allure customers, where the law orders every company to have a “pollution free” vehicle option. Tesla also has highest concentration of electric car drivers and charging stations in California.

Toyota would have to come up with another pollution free vehicle to abide by the law if its ends the production of RAV4 EV. According to the latest projections, Toyota would launch a hydrogen fuel cell vehicle for the California market in 2015. Toyota spokesperson John Hanson said that the company has not yet announced the plan to close RAV4 EV program.

Tesla Toyota contract dates back to 2012

In 2012, Tesla Motors Inc (NASDAQ:TSLA) entered into an agreement worth $100 million with Toyota under which the Model S maker supplied battery packs for around 2,600 electric RAV4 EV vehicles over a time period of three years.

In its filing, Tesla Motors Inc (NASDAQ:TSLA) noted that Toyota will end the current RAV4 EV model this year. Tesla said that the supply deal earned $15.1 million in revenue in the quarter that ended March 31 and production activities under this program will end in 2014.

Tesla Motors Inc (NASDAQ:TSLA) is underway in development for its Model X crossover, which has Falcon wings for backseat passengers, and will cost more than the electric RAV4. Tesla Motors Inc (NASDAQ:TSLA) is nevertheless increasing supplies of components for investor Daimler AG’s electric Mercedes B-class car as it plans a battery “gigafactory” to cut lithium-ion cell costs by 30%.

About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com