Did Toyota Motor Corp. Just Dump Tesla Motors Inc.?

Toyota says goodbye to Tesla Motors zero-emission battery cells and instead opts for fuel cells. But what does the breakup mean for Tesla going forward?

May 14, 2014 at 2:15PM

Toyota (NYSE:TM) and Tesla Motors (NASDAQ:TSLA) have been going steady since 2010, when Toyota coughed up $50 million for a 3% stake in the electric-car maker. At the time, Tesla's award-winning Model S sedan was merely a twinkle in CEO Elon Musk's eye. Toyota's multimillion-dollar investment gave the upstart company the credibility it needed to get its business off the ground. Toyota and Tesla's relationship continued to blossom as the two auto companies agreed in 2011 to a three-year, joint development deal under which Toyota would pay Tesla $100 million to supply electric powertrain components for the Japanese carmaker's zero-emission RAV4 SUV.

Thanks for the memories
With that three-year period now ending, Toyota has said that it will not renew its contract with Tesla Motors.

The auto giant today builds more gas-electric-hybrid cars than any other car manufacturer in the world. Toyota plans to shift its focus from electric-powered vehicles to those powered by fuel cell technology. Down the road, Toyota also intends to build out hydrogen refueling stations, according to The New York Times.

It would hardly be indulgent for Tesla investors to feel burned by this news. The tie-up between Toyota and Tesla, after all, was long viewed as the first phase of what might one day become a rich history of successful collaborations between the two companies. On top of this, the divorce could lead investors to lose faith in Tesla's vision of mass-market adoption for electric vehicles -- particularly if they believe that this is Toyota's way of saying that it sees a future in which fuel cells reign supreme over all-electric technology.

Tesla Model S Close Up

Source: Tesla Motors

While Tesla continues to grow sales of its Model S, revenue from the deal with Toyota was a welcome input to its bottom line. In the first quarter of fiscal 2014, for example, Tesla earned $15 million in revenue from Toyota powertrain sales. With the partnership ended, Tesla will need to work to maintain its other strategic relationships with companies, including Panasonic and Daimler.

Tesla recently began making electric powertrains and battery packs for the Mercedes-Benz B-Class electric vehicles. This will no doubt be an important partnership for Tesla, especially now that Toyota is out of the picture. For now, Toyota said it would keep its initial $50 million in Tesla stock regardless of its powertrain supply agreement ending. Meanwhile, with plans for a multibillion-dollar battery factory and the highly anticipated launch of its Model X crossover EV, Tesla certainly has enough on its plate to keep it busy -- even without Toyota's business.

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Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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