“I don’t want to have to import a hybrid car. I want to build a hybrid car here.” – President Obama in Warakusa, Indiana, 5 Aug 2009.
On 5 Aug 2009, the Obama administration announced the recipients of the grants for the electric vehicle industry, i.e. the $2.4 billion Electric Drive Battery and Component Manufacturing Initiative (part of the American Recovery and Reinvestment Act). Barack Obama was in Indiana while Joe Biden was in Michigan, the 2 states getting the most electric vehicle money, to announce the list of 48 grants that will be administered by the US Department of Energy (DOE).
The biggest individual grant, at $299 million, went to Johnson Controls, a Holland, Mich., firm that has struck a deal with Ford to provide batteries for future vehicles. The second biggest grant, at $249 million, went to startup A123 Systems, a Romulus, Mich., company with links to Chrysler.
It’s significant for A123Systems since the program’s goal of getting technology into large-scale production within 2-3 years and the requirement for awardees to share costs tends to tilt the scales away from younger ventures. A123 has requested as much as $438 million but the $249 million grant could help bring the GE Energy Financial Services’ backed company closer to its long-planned IPO.
The Big Three automakers will also receive the grants. GM is receiving 3 grants totaling $241.4 million, Ford will get 2 grants totaling $92.7 million and Chrysler will get 1 grant of $70 million.
The announcement came after several intense months of applications and lobbying. About 257 companies applied, seeking $9.6 billion total. Among those companies were a number of venture-backed startups. Analysts and investors said the DOE seems to be playing safe in selecting the 48 companies, picking big names and companies that plan to build plants in Michigan, the home of the ailing US automobile industry which won 11 grants.
For the smaller companies including venture-backed firms, the outcome was a let-down. Many of those left out of the awards have production lines in Asia and were willing to start up manufacturing in the US to support the deployment of electric-transportation technologies.
Boston-Power was one of the companies to lose out on the DOE grant with its $100 million application. It already has manufacturing facilities in Taiwan and is currently building another plant in China. It has now applied for a $100 million grant from the US Department of Defence, which is likely to announce the recipients in October.
Another company, International Battery Inc, whose main investor is Digital Power Capital, an affiliate of PE firm Wexford Capital, did not get the grant. It will continue to expand its capacity in the US and still hopes the DOE will make some funding available for entrepreneurs.
If you look at the maps here and here, you will see that while Michigan is a winner, California is a loser (comment: I’m surprised!). No awards were made to companies planning to set up manufacturing plants in the state.
“The decision is a real blow to California’s clean transportation technology industry and the state’s clean energy initiatives,” said Paul Beach, president of Quallion LLC, in a statement. Quallion’s bid to help it build a $200 million plant in Palmdale, Calif., wasn’t selected, and it will continue to pursue that plan with other funding opportunities, both from the government and private sector. The company is controlled by billionaire Alfred E. Mann, and is already a supplier for military vehicles and medical devices, and it has been profitable for the past six years, said Beach, in an interview.
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