PALO ALTO, Calif.—Electric car-maker Tesla Motors Inc. has reached a three-year agreement with Toyota to supply powertrain equipment worth about $100 million as the Japanese auto-maker looks to expand its fleet of electric vehicles.

By mid-2012, Toyota hopes to have prototypes that combine its current RAV4 model and a Tesla electric powertrain.

Toyota’s Prius is already the world’s best-selling gasoline electric hybrid but the company plans to sell more electric drive models, including the Scion iQ subcompact and a plug-in version of the Prius that runs on electricity for 20kms before the gas-electric motor kicks in.

Toyota bought a 2.9 per cent stake in Tesla last year—part of a deal saw the startup acquire a shared Toyota and General Motors plant in Fremont, Calif., wher the powertrain equipment will be made.