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The real reason for Obama's $2.4 billion electric car grants

More than half of the money goes to battery manufacturing. US-made hybrids are currently dependent on batteries made abroad.

By Staff writer / August 5, 2009

President Barack Obama delivers remarks on the economy at a recreational-vehicle manufacturing plant in Wakarusa, Ind., Wednesday.

Michael Conroy/AP

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Washington

Want to know why the Obama administration’s announcement of $2.4 billion in electric vehicle grants could be very important? It’s simple: The commitment show that Washington may be getting serious about keeping batteries from becoming the new oil.

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Right now, overseas manufacturers, primarily in Asia, are the world leaders in the mass production of advanced vehicle batteries. Even US-made hybrids such as the Ford Fusion have a foreign battery at their core.

But the White House and many lawmakers in Congress say they don’t want to swap reliance on Saudi oil for reliance on South Korean batteries as part of the nation’s green energy future. Thus the administration has steered $1.5 billion of the $2.4 billion in electric technology development funds to battery manufacturing projects.

“I don’t want to have to import a hybrid car,” said President Obama at an appearance in Warakusa, Ind., Wednesday. “I want to build a hybrid car here.”

If you think the comparison between oil and batteries is overblown, consider that IHS Global Insight predicts that by 2020 some 47 percent of the vehicles sold in the US will have some kind of battery power at their core, either coupled with small sparked engines in hybrids, or alone in full electric cars and trucks.

“More research and more development of batteries is urgent and critical,” says Dan Sperling, director of the Institute of Transportation Studies at the University of California, Davis. “Advanced batteries of different sizes and shapes will be in every car of the future.”

Of course, there was also an obvious political element to the announcement. Top officials were dispatched all across the US to make announcements at firms that had won a piece of the cash.

Thus Mr. Obama was in Indiana, and Vice President Biden in Michigan – the two states getting the most electric vehicle money.

As critics question whether the administration’s policies have made much difference in fighting the recession, the grant announcements offered officials a chance to link the stimulus bill – the source of the funds – with local jobs.

Hard-hit Michigan, for instance, is home to firms that won 11 grants. Michigan Gov. Jennifer Granholm said the state could gain up to 30,000 jobs by 2020 if it becomes a leader in battery technology.

While welcome, those jobs would not be enough to replace those lost in recent years, as Michigan has shed almost 250,000 manufacturing jobs since 2005.

The biggest individual grant, at $299 million, went to Johnson Controls, a Holland, Mich., firm that has struck a deal with Ford to provide batteries for future vehicles.

The second biggest grant, at $249 million, went to A123 Systems, a Romulus, Mich., company with links to Chrysler.

Besides the $1.5 billion of money devoted to batteries, the grants announced Wednesday also included about $500 million for makers of electric drive components, and $400 million for the purchase of thousands of plug-in hybrid and all-electric vehicles for demonstration purposes.

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