The U.S. Department of Energy announced yesterday that Ford Motor Company, Nissan Motors, and Tesla Motors will be getting the first three of many loans to be used for advanced technology automobiles. According to the press release, the “$8 billion in conditional loan commitments for the development of innovative, advanced vehicle technologies that will create thousands of green jobs while helping reduce the nation’s dangerous dependence on foreign oil.”

Of the $8 billion total, $5.9 billion will go to Ford Motor Company to “transform factories across Illinois, Kentucky, Michigan, Missouri, and Ohio to produce 13 more fuel efficient models.” Nissan North America, Inc. will get $1.6 billion in order to retool their Smyrna, Tennessee factory to build advanced electric automobiles as well as to build an advanced battery manufacturing facility. $465 million will go to Tesla Motors to manufacture electric drive trains and electric vehicles in California. Tesla, the much hyped about all-electric car manufacturer backed by Silicon Valley investor Elon Musk, has been noted for producing all-electric vehicles that are high quality, fast, and responsive cars with good range. The problem is the sticker price. The Tesla Roadster sells for over $100,000. Their soon to be produced Model S Sedan will sell for around $50,000 after a $7,500 federal tax rebate, still leaving it out of reach for most Americans. The government loan may help Tesla ramp up to mass production, thereby significantly cutting prices even further. This is another step on the way to producing affordable all-electric cars that the public wants to buy. As Elon Musk writes in a recent blog post, he understands the need for affordable electric cars but realizes achieving it won’t be easy:

Tesla is sometimes criticized for the fact that our first car is relatively expensive, implying we thought there was a shortage of sports cars for rich people! Obviously, the transition to electric cars can only occur if they are affordable. However, a low volume and fairly costly product like the Roadster is the only realistic initial option for a small startup trying to create breakthrough technology. New technology in any field takes a few versions to optimize before reaching the mass market and in this case it is competing with 150 years and trillions of dollars spent on gasoline cars.

I want to be clear, though, that we are trying to get there as soon as possible. My main reason for putting so much time and money into helping create Tesla is to speed up the transition to electric cars.

Affordable electric cars must be realized if the technology is to compete with established car makers. There is room for competition but, especially in a weak economy, electric and alternatively fueled vehicles cannot gain a foothold without pricing incentives. Government loans are one way to accomplish this. Another way to promote the adoption of electric vehicles, spur new technology, and get rid of our imported oil addiction would be to impose an immediate $1 per gallon “Freedom Tax” on gasoline. Thomas Friedman argues that this would have the effect of indirectly supporting the political “Green Revolution” in Iran, while pushing the U.S. to the front of the technological and towards our own green revolution.

- Justin Manger

[Image from TechCrunch.com]