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Tesla’s deal with Toyota to end as planned in 2014, after 4 years and $100M

Above: 2012 Toyota RAV4 EV, Newport Beach, California, July 2012

Image Credit: GreenCarReports.com

Several news reports over the weekend noted that Tesla’s contract  to supply Toyota with electric powertrains for its RAV4 EV crossover would end next year.

In the words of Tesla’s latest quarterly report, cited by Bloomberg in a Saturday news story, “Toyota is expected to end the current RAV4 EV model this year.”

But a few other outlets have extrapolated this statement to indicate that the Toyota-Tesla deal is ending “early”–or that there was a possibility the RAV4 EV might continue beyond 2014–which contradicts what’s known about the deal, and the RAV4 EV itself.

Let’s review.

In May 2010, Toyota shocked the industry by announcing it would buy a share in Tesla Motors, following a visit by its new CEO Akio Toyoda to Tesla’s Silicon Valley headquarters and a meeting with its CEO Elon Musk.

The deal included Tesla’s purchase of Toyota’s decommissioned assembly plant in nearby Fremont, California, which Tesla now uses to build its Model S all-electric luxury sedan.

The investment also included a contract under which Tesla would build complete electric powertrains–battery packs, electric motors, and associated electronics–for an all-electric version of the Toyota RAV4 that Toyota would use to comply with California rules requiring it to sell a certain number of zero-emission vehicles.

That car, the Toyota RAV4 EV, was shown as a concept at the November 2010 Los Angeles Auto Show, in production form the following year, and went on sale in September 2012. Toyota said it would sell 2,600 Toyota RAV4 EVs during model years 2012 through 2014.

While cumulative sales of the electric crossover through last month were roughly 1,600, we’re fairly confident it will build and offer the full allotment of 2,600–even if it has to put them into fleets, offer them for very little money, or otherwise subsidize them further.

Doing so will keep the company in compliance with the zero-emission vehicle sales rules issued by the California Air Resource Board (CARB), which is precisely why the RAV4 EV is called a “compliance car” and sold or leased only in California.

But according to Bloomberg, Tesla CEO Musk had said he expected Toyota to extend the agreement, which was initially worth as much as $100 million, based on a July 2011 filing.

Now, Tesla has said, “our production activities under this program are expected to end in 2014.”

According to the same Tesla filing, the company earned $15.1 million from Toyota in the first quarter for supplying battery packs.

A mere seven quarterly payments of that size completes the entire contract, which according to a July 2011 filing by Tesla Motors, is worth $100 million all told.

That amount buys Toyota all the joint development work contributed by Tesla, plus 2,600 battery packs, motors, and associated electronics. That’s roughly $40,000 for each Toyota RAV4 EV, if all costs for which Toyota paid are rolled in.

With payments to Tesla by Toyota in 2012, 2013, and this year, the $100 million level shouldn’t be too hard to reach–meaning the contract is ending largely on schedule.

Toyota spokesman John Hanson told Bloomberg that the company “has not made any announcement” either about the Tesla partnership or any future projects.

He called the RAV4 EV program “a specific number of vehicles that we planned to sell for a specific number of years.”

 

This story originally appeared on www.greencarreports.com.

More information:

Tesla's goal is to accelerate the world's transition to electric mobility with a full range of increasingly affordable electric cars. Palo Alto, California-based Tesla designs and manufactures EVs and EV powertrain components. Tesla ha... read more »

A Japanese multinational automaker headquartered in Toyota, Aichi, Japan. In 2010, Toyota employed 300,734 people worldwide, and was the third-largest automobile manufacturer in 2011 by production behind General Motors and Volkswagen G... read more »

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