(WIRED) -- The Obama Administration will lend Tesla Motors $465 million to build an electric sedan and the battery packs needed to propel it. It's one of three loans totaling almost $8 billion that the Department of Energy awarded Tuesday to spur the development of fuel-efficient vehicles.
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 is also lending $5.9 billion to Ford to retool factories in five states. Nissan will receive $1.6 billion to refurbish a factory in Tennessee to produce electric cars.
The loans are the first awarded under the $25 billion Advanced Technology Vehicle Manufacturing Program to help automakers offset the cost of retooling to build eco-friendlier cars that are at least 25 percent more fuel-efficient than 2005 models.
"We have a historic opportunity to help ensure that the next generation of fuel-efficient cars and trucks are made in America," the president said in a statement. "These loans -- and the additional support we will provide through the Section 136 programs -- will create good jobs and help the auto industry to meet and even exceed the tough fuel-economy standards we've set while helping retain our competitive edge in the world market."
The Obama Administration announced last month that it is raising fuel-efficiency standards from the current average of 27.5 miles per gallon to 35 miles per gallon by 2016. Chu said the loans will help automakers achieve that goal.
"The American innovation machine, when it revs up, is the greatest in the world," he said during a press conference at Ford's headquarters in Detroit, according to the Detroit News. "Today, we're putting that engine into gear."
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 this program," company CEO Elon Musk said. "I'm confident we'll put the money 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 it unveiled in March and had been in discussions with the agency for about nine months. It had sought $350 million to retool a factory to build the car and $100 million to manufacture battery packs and drivetrain components. Those packs and components will be used in vehicles built by Tesla and other automakers most notably Daimler, which recently bought nearly 10 percent of Tesla to jump-start development of the Smart EV.
Musk said the money will be disbursed on a monthly basis. Repayment will commence within one year of the start of Model S production and the loan must be repaid by 2022.
"There are incentives for early repayment," he said, without elaborating, "and I suspect we will have repaid the loan well before 2022."
There's still no word on where the factories will be located, but Musk said they most likely will be in California. An announcement could come as early as next month, he said. As for the Model S, Musk said it could share components with Mercedes sedans now that Daimler has a stake in Tesla.
"There's a possibility the car will use a Mercedes-derived suspension and other components such as safety systems, crash structures, interior fit and finish," he said. "There are a number of areas where Daimler can be quite helpful."
Musk said Daimler's investment in Tesla coupled with the federal loan and revenue from the Roadster leaves the company "in pretty good shape" financially. Tesla has gotten the cost of goods for the Roadster the materials and labor cost to build the car down to about $80,000 and the company expects to be profitable in July, he said. The company has delivered more than 500 Roadsters and received more than 1,200 refundable deposits at $5,000 apiece for the Model S.
Ford was the big winner, walking away with a promise of $5.9 billion in loans through 2011. The automaker says it will use the money to retool 11 factories in five states to build more-efficient gasoline engines and electric vehicles. It also will use the money to convert two truck factories to automobile production. Ford has said it will have an EV by 2011, and it plans to spend $14 billion on advanced technology during the next seven years. It expects to begin drawing on the government loan within 35 days.
"This is the kind of partnership that will help American manufacturing not just survive, but thrive," company president Alan Mulally said after Chu announced the loans at Ford's headquarters in Detroit, according to the Detroit Free Press. "Ford intends to be the fuel-economy leader."
Nissan is charging ahead with plans to put an electric car in showrooms next year. Although the first cars will be built in Japan, Nissan says it will use the $1.6 billion loan to retool a factory in Smyrna, Tennessee, to take over production by 2012. Construction on the factory is slated to begin by the end of the year. Nissan says the factory will employ 1,300 people and build 50,000 to 100,000 cars at full production.
"This loan is an investment in America," Dominique Thormann, a senior vice president at Nissan North America, said in a statement. "It will help us put high-quality, affordable zero-emissions vehicles on our roads. This project will expand our Smyrna plant, and that's great economic news."
Chu said the Obama Administration hopes to disburse the loans quickly.
More than 100 companies ranging from General Motors to Aptera Motors are seeking funding through the program. The government is expected to announce recipients for the remainder of the $25 billion program next year. The DOE did not disclose the terms of the loans.
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