US gives carmakers $8 billion to go electric

The Energy Department made the announcement Tuesday, just as Nissan said it will start selling an all-electric car in the US next year.

Tatsuyuki Tayama/AFP/FILE
Nissan Motor's prototype full-electric car is presented at a test-drive event in Nissan Oppama Grandrive in Yokosuka on August 6, 2008. The third largest automaker in Japan aims to start selling an electric car in the United States and Japan in 2010 and the rest of the world in 2012.

The shift toward electric-powered vehicles gained momentum Tuesday, as major automakers outlined production plans and became the first to tap a $25 billion government fund.

Ford, Nissan, and the upstart California carmaker Tesla will get the first chunk of the fund to be disbursed – $8 billion in loans to boost development and production of advanced energy-efficient cars in the US. The Energy Department, which announced the funding, said it plans to make loans in coming months to other large and small automakers and parts suppliers.

Separately, Nissan said it will start selling electric cars in Japan and the US next year and to have them in mass production by 2012. Nissan will use the government loan to support its plan.

The announcements signal an industry in transition. Even as carmakers struggle to weather a deep recession, they want to be ready to meet the changing demands of consumers and government policymakers. They need to make cars that their customers can afford to buy. But they also can't afford to be caught without cleaner technologies at a time of potentially rising oil prices and tightening standards for emissions.

At a shareholders meeting in Japan, Nissan CEO Carlos Ghosn said he's expecting to thread that needle.

"If it's not affordable, it's not going to work," he said, according to an Associated Press report. But "I can tell you I'm not at all worried about how to sell these cars, because there is an appetite for zero-emission cars."

The goal of the loan program, passed by Congress and the Bush administration in 2007, is to accelerate clean-car production and sales. But the funding will also act as a kind of jobs program for a hard-hit industry.

Meanwhile, the Obama administration is introducing additional carrots and sticks – such as a recent move to tighten emissions standards – to push carmakers and consumers toward so-called "zero-emission" vehicles. Legislation to combat the threat of climate change could push the industry further down the electric road.

Energy Secretary Steven Chu announced the new loans in Ford's home town of Dearborn, Mich. "These investments will come back to our country many times over – by creating new jobs, reducing our dependence on oil, and reducing our greenhouse gas emissions," he said.

The department said the program will promote multiple clean-car technologies, a goal evident in the first loans announced.

- Ford Motor Co. will receive $5.9 billion to finance engineering advances in traditional internal combustion engines as well as gas-electric hybrids.

- Tesla Motors in San Carlos, Calif., will receive $465 million, mainly to ramp up production of an all-electric family sedan. The company predicts its Model S will have a base price of $49,900 (after a $7,500 federal tax credit) and run as many as 300 miles on a single charge.

- Nissan will get $1.6 billion to produce electric cars and batteries in Smyrna, Tenn. Where Toyota and other large automakers have been pushing gas-electric hybrids, Mr. Ghosn has committed Nissan to an all-electric strategy. The new Nissan may cost about 4 cents a mile to operate versus 13 cents a mile for a gas-powered car that gets 30 miles per gallon, according to an Electric Auto Association newsletter.

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