$2.4billion of stimulus money to make America a global leader in electric and hybrid car development

If you listen to US President Barack Obama it has been a long time coming – his decision to pour $2.4billion of stimulus money to make America a global leader in electric and hybrid car development comes as the country plays catch up to the likes of Japan and even China in the green car race (see article).

Advertisement

“I want the cars of the future and the technologies that power them to be built right here,” the President said.

So will his billions rejuvenate the American auto industry and put it back on top of the motoring world as it enters a new era?

Who will benefit?

The economic stimulus funds have been doled out to programmes in 20 US states, but Michigan, the traditional home of motoring, is the key beneficiary.

The state, which has suffered the brunt of the fallout from the recession and has the nation’s largest unemployment rate at 15.2 per cent, has received 11 grants worth a total of $1.36billion to develop new kinds of batteries and electric car technologies, as well as to build the factories where they will be manufactured.

America’s top car manufacturers have reaped the rewards too. General Motors has received more than $241million to make battery packs for the Chevrolet Volt – which is due to be launched next year and will be known as the Vauxhall/Opel Ampera in Europe – as well as to build a rear-wheel electric-drive system. Ford meanwhile has picked up $93million to make electric-drive axles and plug-in hybrid electric vehicles; while Chrysler has scooped $70million for plug-in hybrid electric trucks and people movers.

The biggest individual grants however, were reserved for Johnson Controls and A123Systems. Johnson Controls, a Michigan based company, scooped $299million to provide Ford with batteries for future electric vehicles – the company will now convert a plant once used to make electronics for car interiors to one that will produce lithium-ion battery cells for hybrid vehicles, as well as assemble battery systems. A123Systems meanwhile, gets $249million to make battery packs and components.

Who misses out?

Broadly speaking, the money is split into three pots – around $400million on grants to purchase plug-in hybrid electric vehicles and all-electric vehicles for test fleets across the country; another $500million for US-based manufacturers who produce key components for electric vehicles; and around $1.5billion to the battery manufacturers themselves.

According to the New York Times, the grant programme is designed to help alleviate a key bottle neck for the production of electric cars – the bottle neck being the electric drive trains, the batteries and the electric components as manufacturers complain about an effective chicken and egg situation with the electric car in that they can’t be sold until demand and infrastructure is sufficient, but people won’t demand them until the cars are a truly viable alternative.

However, critics point out that the money appears to be split among already established names and leaders in the field and that battery technology has not improved at the rate of other technologies such as semiconductors and photovoltaics.

So this raises the question as to whether so much money should be poured into existing battery technologies ahead of research and development projects for battery designs of the future.

Our verdict

It appears the Obama administration has bet on winners with the bulk of the cash distributed through its stimulus plan. It’s an understandable move too – the automotive industry in the US desperately needs something to cling to, a clear path for its future. Electric cars will only ascertain respect among the American public if the technology needed to make them a viable alternative to petroleum and diesel starts to emerge quickly.

The problem however, is that pouring money into short-term projects may make it more difficult for upstarts to emerge with more promising technology down the road. There is a risk that America could be left behind again as other countries examine more forward-thinking technologies.

However, let’s not overlook that the Obama administration is considering other technologies too in separate funding programmes. Just last week, the Department of Energy set aside $327million for laboratory infrastructure projects and scientific research into fusion energy research, biofuels and the Smart Grid.

Unfortunately, with the economy so dire and solutions needed, the US simply needs to be brought up to speed now so it can be competitive once more and so its auto industry can be taken off life support – for that the Obama stimulus deserves commendation. However, it’s vital that the powers-that-be don’t take their eye off the bigger picture completely or these problems may strike again.

Announcement from our Chairman, David C BarclayThe World Renewable Energy Association are delighted to announce the launch of a brand-new initiative exclusively for its members. The Renewable Energy Finance Hub has been launched following the largest survey undertaken with UK businesses conducted by WoREA in conjunction with the UK Government and its partners. Reduce your businesses carbon footprint today and begin your journey towards net zero!