Not your Father's BuickThe Obama Administration will lend Tesla Motors $465 million tobuild an electric sedan and the battery packs needed to propel it. It'sone of three loans totaling almost $8 billion that the Department ofEnergy awarded Tuesday to spur the development of fuel-efficientvehicles.
Tesla CEO Elon Musk behind the wheel of a Model S electric car in March.
Energy Secretary Steven Chu announced that the Department of Energy isalso lending $5.9 billion to Ford to retool factories in five states.Nissan will receive $1.6 billion to refurbish a factory in Tennessee toproduce electric cars.
The loans are the first awarded underthe $25 billion Advanced Technology Vehicle Manufacturing Program tohelp automakers offset the cost of retooling to build eco-friendliercars that are at least 25 percent more fuel-efficient than 2005 models.
"We have a historic opportunity to help ensure that the next generationof fuel-efficient cars and trucks are made in America," the presidentsaid in a statement. "These loans -- and the additional support we willprovide through the Section 136 programs -- will create good jobs andhelp the auto industry to meet and even exceed the tough fuel-economystandards we've set while helping retain our competitive edge in theworld market."
The Obama Administration announced last monththat it is raising fuel-efficiency standards from the current averageof 27.5 miles per gallon to 35 miles per gallon by 2016. Chu said theloans will help automakers achieve that goal.
"The Americaninnovation machine, when it revs up, is the greatest in the world," hesaid during a press conference at Ford's headquarters in Detroit,according to the Detroit News. "Today, we're putting that engine intogear."
Tesla said its share of the pie will help get the Model S sedan (pictured) on the road by the end of 2011.
"We are honored to receive one of the first loan awards in thisprogram," company CEO Elon Musk said. "I'm confident we'll put themoney to very productive use. We look forward to producing the Model S."
Tesla has long been counting on the loan to help it build the sedan itunveiled in March and had been in discussions with the agency for aboutnine months. It had sought $350 million to retool a factory to buildthe car and $100 million to manufacture battery packs and drivetraincomponents. Those packs and components will be used in vehicles builtby Tesla and other automakers most notably Daimler, which recentlybought nearly 10 percent of Tesla to jump-start development of theSmart EV.
Musk said the money will be disbursed on a monthlybasis. Repayment will commence within one year of the start of Model Sproduction and the loan must be repaid by 2022.
"There areincentives for early repayment," he said, without elaborating, "and Isuspect we will have repaid the loan well before 2022."
There'sstill no word on where the factories will be located, but Musk saidthey most likely will be in California. An announcement could come asearly as next month, he said. As for the Model S, Musk said it couldshare components with Mercedes sedans now that Daimler has a stake inTesla.
"There's a possibility the car will use aMercedes-derived suspension and other components such as safetysystems, crash structures, interior fit and finish," he said. "Thereare a number of areas where Daimler can be quite helpful."
Musksaid Daimler's investment in Tesla coupled with the federal loan andrevenue from the Roadster leaves the company "in pretty good shape"financially. Tesla has gotten the cost of goods for the Roadster thematerials and labor cost to build the car down to about $80,000 andthe company expects to be profitable in July, he said. The company hasdelivered more than 500 Roadsters and received more than 1,200refundable deposits at $5,000 apiece for the Model S.
Fordwas the big winner, walking away with a promise of $5.9 billion inloans through 2011. The automaker says it will use the money to retool11 factories in five states to build more-efficient gasoline enginesand electric vehicles. It also will use the money to convert two truckfactories to automobile production. Ford has said it will have an EV by2011, and it plans to spend $14 billion on advanced technology duringthe next seven years. It expects to begin drawing on the governmentloan within 35 days.
"This is the kind of partnership that willhelp American manufacturing not just survive, but thrive," companypresident Alan Mulally said after Chu announced the loans at Ford'sheadquarters in Detroit, according to the Detroit Free Press. "Fordintends to be the fuel-economy leader."
Nissan is charging aheadwith plans to put an electric car in showrooms next year. Although thefirst cars will be built in Japan, Nissan says it will use the $1.6billion loan to retool a factory in Smyrna, Tennessee, to take overproduction by 2012. Construction on the factory is slated to begin bythe end of the year. Nissan says the factory will employ 1,300 peopleand build 50,000 to 100,000 cars at full production.
"This loanis an investment in America," Dominique Thormann, a senior vicepresident at Nissan North America, said in a statement. "It will helpus put high-quality, affordable zero-emissions vehicles on our roads.This project will expand our Smyrna plant, and that's great economicnews."
Chu said the Obama Administration hopes to disburse the loans quickly.
More than 100 companies ranging from General Motors to Aptera Motorsare seeking funding through the program. The government is expected toannounce recipients for the remainder of the $25 billion program nextyear. The DOE did not disclose the terms of the loans.