Global automotive giant Toyota has teamed with electric carmaker Tesla Motors to build EVs at a California plant once used jointly by Toyota and General Motors.

The deal saves the jobs of about 1000 of the 5000 employees laid off at the New United Motor Manufacturing factory after Toyota and GM stopped production of small cars during the global recession.

The plant is in Fremont, near San Francisco, not far from Tesla's Palo Alto headquarters.

Toyota will take a US$50 million ($74 million) stake in Tesla and Tesla will buy the Fremont plant. Analysts see the deal as a vote of confidence in the future of EVs in the United States - the plant at its peak produced 6000 vehicles a week.

Toyota president Akio Toyoda and Tesla founder and chief executive Elon Musk said the two companies planned to co-operate on the development of electric vehicles, parts and engineering support.

Toyoda said he had sensed the great potential of Tesla's technology.

"Through this partnership, by working together with a venture business such as Tesla, Toyota would like to learn from the challenging spirit, quick decision-making and flexibility that Tesla has," Toyoda said.

"Decades ago, Toyota was also born as a venture business. By partnering with Tesla, my hope is that all Toyota employees will recall that 'venture business spirit', and take on the challenges of the future."

Musk said Toyota's investment in Tesla was a powerful endorsement of Tesla technologies.

"We look forward to learning and benefiting from Toyota's legendary engineering, manufacturing and production expertise," he said.

Musk said Tesla's goal was to produce increasingly affordable electric cars to mainstream buyers, "relentlessly driving down the cost of EVs".

He said his company would spend a couple of hundred million dollars preparing the Fremont plant for production. A US$465 million loan from the US Department of Energy would fund the production ramp-up.

Tesla is renowned for its Lotus Elise-based high-performance electric sports cars that can hit 200km/h and travel 380km per charge of their lithium-ion batteries. It is also developing a four-door EV sedan called the Model S.

Its technologies have attracted attention from other car-makers, including Daimler AG - owner of Mercedes-Benz - which bought a slice of Tesla last year and contracted it to produce batteries for its upcoming electric Smart.

So far, Tesla has delivered more than 1000 Roadsters to buyers in North America, Europe and Asia. The company plans to open a dealership in Sydney this year.

Toyota, meantime, has started testing its plug-in Prius. It plans to bring another plug-in EV on to the market by 2012, one that almost certainly will be built at the updated Fremont factory.

Toyota is the world's biggest producer of petrol-electric hybrids, with 2.5 million hybrid cars already on the roads around the world.

The Fremont factory was established jointly by Toyota and GM in 1984. It made Toyota Corollas and Chevrolet Novas and was regarded as one of the best plants for quality products in the US, until both companies abandoned production at the height of the global crisis.