21 May 2010 Last updated at 10:42 ET

Toyota invests $50m in electric car firm Tesla Motors

Tesla has ambitious plans to grow the company

Toyota is to invest $50m (£35m) in US electric car company Tesla Motors, as the two firms announced a joint partnership to build electric vehicles.

The deal will give the Japanese giant a stake of about 2.5% in Tesla, which will build its new saloon model at a Toyota factory near San Francisco.

Analysts said Tesla, which was only formed in 2003, will benefit from Toyota's mass production skills.

In turn, Toyota will be able to access Tesla's electric battery expertise.

The deal could also boost Toyota's reputation in the US, which has been badly hit by a number of mass recalls over problems with faulty accelerator pedals and braking systems.

'Powerful stimulus'

Tesla chief executive Elon Musk described the announcement as a "gesture of support" from the Japanese company.

Toyota chief executive Akio Toyoda said: "Working with Tesla will provide us with a powerful stimulus."

While Toyota is the world's largest carmaker, Tesla has only 500 employees and makes just 15 cars per week.

However, Tesla has ambitious plans to expand the company, hoping that electric cars will eventually move into the mainstream.