Tesla will end battery supply agreement with Toyota this year

Article by Andrew Christian, on May 12, 2014

A battery pack supply agreement between Tesla Motors Inc. and Toyota Motor Corp. will end this year. Toyota disclosed in May 2012 that it would buy Tesla’s battery packs for 2,600 electric RAV4 EVs over three years. Tesla chief executive Elon Musk had remarked that he expected the Japanese carmaker to extend the agreement, which had an initial value of up to $100 million based on a July 2011 filing.

Toyota, however, is expected to end production of the current RAV4 EV model this year, Tesla said in a quarterly filing. Tesla said it gained $15.1 million in revenues from the supply agreement in the first quarter ended March 31.

The termination of the Toyota supply program comes as Tesla continues to expand sales of Model S sedans globally while preparing its Model X electric crossover for delivery next year. Tesla is also readying a lower-priced rechargeable sedan that will be due in two to three years.

The electric carmaker is increasing supplies for the Mercedes-Benz B-class Electric Drive as it moves on with its plans to build a battery “gigafactory” to reduce lithium-ion cell costs by 30 percent. Both Toyota and Mercedes parent Daimler AG hold stakes in Tesla.

Toyota spokesman John Hanson said that Toyota has not disclosed plans to end its RAV4 EV program. He remarked that the project was for a specific number of vehicles planned for sales in a specific number of years.

Hanson quipped that models like the RAV4 EV sell mainly in California, which compels large carmakers to offer pollution-free vehicles. So far, Toyota has sold 1,594 electric RAV4s from 2012 to April 2014, according to reports from the carmaker. Toyota will commence next year sales of a hydrogen fuel cell sedan in California.

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