As Toyota Joins With Tesla, Alternative Fuels Become a Major Focus

Before Toyota Motor (TM) became mired in recall woes, the Japanese automaker was well-known for developing innovative vehicles such as the Prius gas-electric hybrid. Now, the company is preparing to move to other alternative fuel technologies to ensure its future viability, according to reports.

Toyota's recent $50 million investment in electric-car start-up Tesla Motors (TSLA) is just the first such partnership the world's largest automaker is pursuing, company President Akio Toyoda said Friday in Japan. "Collaboration with other partners is an important part of the future of Toyota," he said. The companies are jointly developing an electric car prototype.

Toyoda said his company is taking a multipronged approach, looking at all options on the alternative fuels front, including hydrogen fuel-cell vehicles, biodiesel and other biofuels. Toyota is also examining the use of smaller, low-cost lithium-ion batteries, rather than the large, expensive ones that are currently used in electric-vehicle technology.

Tesla's use of small, laptop-style batteries, however, isn't an ideal solution, said Shinichi Sasaki, a Toyota executive vice president, in an interview with The Wall Street Journal. The technology requires thousands of cells to power a car, raising the chances of individual cells failing. Still, Sasaki said, if Tesla's system can be shown to work, it would be intriguing because those lithium-ion batteries are simpler.

Toyota is motivated by the need to produce more fuel-efficient, lower-emission vehicles. New federal standards, announced in April and set to go into effect in 2016, not only raise fuel-efficiency requirements, but for the first time set greenhouse gas emissions standards for cars and trucks.

In addition to the prototype it is developing with Tesla, Toyota has developed its own electric vehicle, which it plans to begin selling in 2012.