Tesla Electric Cars Take Off with $465 Million in Government Funding

Tesla is getting more interesting by the day. Here's a company that was basically flat on its back just a couple of years ago, plagued by internal strife and trying to sell a then-$92,000 electric Roadster that cost $140,000 to build. That's not my estimation, it's right from the blog of CEO Elon Musk, who was responding to a suit by an embittered co-founder.

I recently drove a Tesla Roadster (pictured) owned by the Vulcan Motor Club on a jaunt through rainy rural New Jersey, and enjoyed it more than similar rides in even more expensive high-end supercars by Aston-Martin and Lamborghini.

 And now Tesla is in fast company. The Department of Energy (DOE) announced June 23 that Tesla was one of three recipients — with Ford and Nissan — of $8 billion in advanced technology loan funds. Tesla will get $465 million to build a manufacturing plant for the new ultra-fast Model S sedan in Southern California, and a second battery plant in the Bay Area.

The federal fund is designed to further a very worthy cause: ensuring that the U.S. will be competitive in battery technology. It's quite clear that without federal assistance, we will lose that business to Asia, mostly to China and Korea. And right now it really matters who will capture this market: it is, unquestionably, the future of the auto industry.

I like what Tesla is doing — starting with a high-end vehicle and then, gradually, moving into more affordable markets as the company becomes solvent. Musk has told me that Tesla's third car will be even further downmarket than the Model S. The mainstream carmakers are approaching it differently, but they're plugging in, too.

Even the skeptics are starting to gain confidence in Tesla's prospects. The company has now delivered more than 500 Roadsters, and is getting a handle on fulfilling the 800 it has pending. Daimler has bought nearly 10% of Tesla, and the two companies are working together on batteries for electric Smarts.

The largest recipient of the DOE funding is Ford, which got $5.9 billion to increase the fuel efficiency of a dozen popular models, from the Taurus to the Focus, Mustang, Escape and F-150 truck. The upgrades include very economical direct-injection EcoBoost engines, electrically assisted steering, start-stop technology and six-speed transmissions. Ten factories will get upgrades.

Nissan is the only foreign automaker to get funded, but it too is investing in U.S. factories. Its Smyrna, Tennessee plant will be revamped to build the company's new battery car, and a second battery factory will be added at the same location. Nissan is playing it smart, because its battery strategy includes charging networks around the world to make sure the cars can plug in.

All told, that's $8 billion in federal funding from the action-oriented DOE, which has become a business incubator for green cars. Expect to see a lot more action, because this was only the first third of $25 billion in funding to be announced. General Motors and Chrysler will undoubtedly also get funded in one of the next rounds. Chrysler is already out of bankruptcy and GM soon will be back in the game, too.

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