A Long Bet on Electric Cars

The Obama Administration is eager to establish a green auto industry and is willing to spend money to make it happen. So far the U.S. Energy Dept. has agreed to lend $8.5 billion to help companies large and small retool plants to make more fuel-efficient cars and develop new technologies. On Sept. 22, the Energy Dept. announced the latest such loan: $528 million for a Silicon Valley startup called Fisker Automotive that vows to produce 130,000 plug-in hybrids by 2013.

The U.S. government believes in funding companies outside the established industry because it's important to nurture new ideas. "We're trying to create competition among technologies in the marketplace," says Matt Rogers, an Energy Dept. adviser. Fisker and Tesla Motors, another startup that has received $465 million in federal money, both say their cars are high-tech and have spurred plenty of consumer interest. But some experts believe the upstarts are too small to compete. "We're pouring $1 billion into two companies without a future," says industry watcher Maryann N. Keller. "The economics of the industry favors large companies."