Can Obama jump start the electric car industry?

President Barack Obama chose a beat up factory town in Indiana to announce his $2.4 billion electric vehicle plan two days ago. At first glance, the battery plan looks juicy. But a deeper dive into the particulars raises some questions about why so much of the money will go to production of existing battery models and so little into R&D of battery designs for the future.

Also, the Obama plan appears to strongly back incumbents. Those same incumbents have struggled to make battery technology that is both cost-effective and contains sufficient charge to let electric vehicles run for more than 100 miles per plug-in.

All told, the battery bucks are going into three pots, according to About $400 million is going to grants to purchase thousands of plug-in hybrid and all-electric vehicles for test demonstrations around the country. Another $500 million will land in the hands of U.S.-based manufacturers who produce key components for electric vehicles. And the largest chunk, $1.5 billion, goes to battery manufacturers themselves.

The biggest grants are going to two fairly established companies. Johnson Controls gets $299 million to make nickel-cobalt-metal batteries. A123 Systems gets $249 million to make battery packs and components. General Motors gets $106 million for production of high-volume battery packs to be used in GM's hyped electric vehicle, the Chevy Volt.

The grant program is designed, according to the New York Times,to alleviate a key bottleneck for production of electrics cars. That bottleneck is the drive train, batteries and electric components for these clean, green vehicles. U.S. automakers have long complained that the electric car problem was a chicken-and-egg situation. Lacking sufficient production of batteries and components for electric vehicle propulsion, the industry could never achieve economies of scale. But few companies could afford to scale up production for a nascent market with unsettled technologies and no clear winners for standard technology platforms.

The administration's grants will help dozens of companies either ramp up production or expand capacity for everything from batteries to hybrid transmission. The U.S. Department of Energy has tried to reach a broad group of recipients in an attempt to support multiple battery technologies until a few clear winners emerge.

That's admirable, but it sure looks like a lot of money is going into a mere handful of pockets who are already leaders in a field. Battery technology has not improved in costs and efficiencies at the same rate as many other types of technologies, such as semiconductors or photovoltaics. So betting on winners right now, while tempting, might be premature and perhaps could make it even harder for upstarts with more promising technology to enter the field down the road.

Read Full Story
  • DJI27173.96358.561.34%
  • NIKKEI 22523204.62116.820.51%
    Hang Seng23235.42-75.68-0.32%
  • USD (PER EUR)1.16-0.0037-0.31%
    USD (PER CHF)1.08-0.0029-0.27%
    JPY (PER USD)105.560.15700.15%
    GBP (PER USD)1.27-0.0007-0.06%

From Our Partners