Toyota ends powertrain deal with Tesla

To the surprise of no one, Toyota has announced the end of a partnership with Tesla that gave rise to the slow-selling RAV4 EV, which will be replaced by a fuel cell car next year. Toyota has said that it can't meet California's zero-emission vehicle (ZEV) mandate profitably with electric cars, but it thinks it can make money, or at least not lose so much of it, with fuel cells.

Toyota signed a $100 million joint development deal in 2011 with Tesla, to build powertrains for its RAV4 EV.

The RAV4 EV didn't sell well. It was introduced last year with low-cost lease and loan offers, but it never really got off the ground. The company now says it sees fuel cells as the best way forward, and it plans to introduce one in California next year.

Though the supply deal will end this year, Toyota's 3-percent stake in Tesla will remain.

The partnership, announced in 2010, was a surprise to analysts in the industry, considering Toyota executives were never on board with an all-electric car after spending millions on its hybrids. At that time, chief executive Akio Toyoda took a step back, saying the market hadn't yet chosen its favorite low-emissions technology.

“When customers do give us their answer,” Toyoda said, “I want the company to be ready.”

Well, customers have answered, and apparently they're not interested in a RAV4 EV. Next year we'll see how they feel about fuel cells.

By Jake Lingeman