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Last week, I published an article talking about why Ford (NYSE:F) isn't getting caught up in Teslamania. My Thesis was that since gasoline and hybrid cars are getting more and more fuel-efficient each year, there is very little justification for most consumers to pay the large premiums for electric cars. On Monday, Toyota's (NYSE:TM) chairman Takeshi Uchiyamada made it clear that the company sees limited market for all-electric cars and that it saw a lot of success in hybrid cars and other alternatives such as hydrogen fueled cars. Mr. Uchiyamada reportedly said: "the reason why Toyota doesn't introduce any major [all-electric product] is because we do not believe there is a market to accept it."

Building an electric car is not very cheap. In an effort to make cars more affordable to general public, companies like Toyota and Ford are investing most of their resources in creating cars that are fuel efficient but not necessarily. Companies like Tesla (NASDAQ:TSLA) are also working on making electric cars more affordable by finding ways to get more efficiency out of batteries in order to maximize the ranges of electric cars. At the current prices, it makes little sense for most consumers to buy all-electric cars because the premium they pay on electric cars will be usually more than their fuel-savings over the life of vehicles.

For example, Toyota's Prius C gets 46 miles per gallon in the city and 53 miles per gallon in the highway, giving it a combined mileage of 50. Running this car for 15,000 miles per year (half in high way and half in the city) with an average gas price of $3.50 per gallon would yield an annual fuel cost of $1,050. Considering that the average sales price of this car is around $21,000, it would cost about $32,000 in purchase and fuel costs to operate it for 10 years. Most electric cars cost that much or more to purchase and it makes little economic sense to buy an electric car for most consumers when there are cheaper options. Similarly, the 2013 model of Toyota Camry Hybrid LE gets 41 miles per gallon when highway and city driving are combined. Toyota Avalon Hybrid's 2013 model also achieves 40 miles per gallon combining the city and the highway.

Toyota and Tesla have an ongoing business relationship. Tesla provides Toyota with components for some of its hybrid cars such as the small size SUV RAV4. Furthermore, Toyota owns about 2.5% of Tesla's outstanding shares. While Toyota probably won't sell its shares of Tesla for a while, the company's ownership of Tesla will probably decline over time as Tesla issues more shares.

Tesla fans insist that electric cars are "tomorrow's technology" whereas the gasoline and hybrid cars are "yesterday's technology." It is very common for Tesla fans to compare the car companies like Ford and GM with horse-sellers in the early 1900s. In the early 1900s, many horse-sellers were highly skeptical about the feasibility of cars and most of them went out of business when cars replaced horses at a high pace. Tesla fans also give Apple's iPhone as an example. When iPhone was introduced to the market, BlackBerry was dominating the smart phone market and Nokia was dominating the feature phone market. At the end, both companies ended up struggling big time when they couldn't keep up with Apple's technology and the "cool" factor. Can Tesla put big car companies out of business by catching them asleep? It probably will not happen, because the major car companies are not actually asleep.

Major car companies are not "sleeping at the wheel," rather they are investing heavily into improving their technologies. For example, Toyota is currently working on a hydrogen fuel cell vehicle, which is expected to hit the markets in 2015. Toyota's current prototype is called FCV-R and the company reports that the car will be able to go 830 km (about 500 miles) between refueling.

Here is how Toyota explains the technology:

"At a steady cruising speed, the motor is powered by energy from the fuel cell. When more power is needed, for example during sudden acceleration, the battery supplements the fuel cell's output. Conversely, at low speeds when less power is required, the vehicle runs on battery power alone. During deceleration the motor functions as an electric generator to capture braking energy, which is stored in the battery."

This sounds very promising as it combines more than one type of technology to build a green and highly efficient car. The car is expected to be sold for about $50,000 and it is likely to attract those that love long road trips. For those that are looking for commuter cars, current hybrids and electric cars such as Volt and Leaf will do fine.

In conclusion, it looks like Toyota's chairman agrees with me that car companies are not limited to electric cars and there are other ways for them to keep innovating while appealing to most consumers.

As I mentioned before, I am currently long in a straddle for TSLA. For those that don't know, an investor goes long in a straddle when he or she buys calls and puts with the same strike price and same expiration simultaneously, hoping to profit from a high volatility in the stock. For example, if a stock is trading for $150 and an investor gets call options for $2 and put options for another $2, he or she will profit from the trade when the stock moves more than $4 ($2+$2). In this case, the investor would benefit if the stock's price fell below $146 or rose above $154. The reason I decided on a two-sided trade on TSLA is because while I believe that the company is overpriced by most metrics, I also see a lot of upside in the stock since there are a lot of hopes and momentum built into the stock. Tesla is very likely to be a binary event, meaning, if it's successful, the share price will go up sharply but if it fails, the share price will crush badly. I can see either of these cases when I look at how passionate people when they are discussing TSLA at most message boards of websites like this. As time goes, we'll find out if my trade will prove profitable or not.

Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long both calls and puts of TSLA.