Government Plans to Revive the Green Car Loan Program

Mon, 4/9/2018 - 1:19 am by Kirsten Rincon

In 2008, U.S. Congress approved a direct loan program for the auto industry, so that it can fund projects for improving the fuel efficiency of vehicles manufactured in the country. Congress allotted $25 billion to the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, for American car makers to develop alternative fuel vehicles. The funds were also to be used for creating advanced technologies to fuel efficiency in conventional vehicles.

In 2008, U.S. Congress approved a direct loan program for the auto industry, so that it can fund projects for improving the fuel efficiency of vehicles manufactured in the country. Congress allotted $25 billion to the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, for American car makers to develop alternative fuel vehicles. The funds were also to be used for creating advanced technologies to fuel efficiency in conventional vehicles. By 2011, the program awarded a total of $8 billion to companies such as Ford, Nissan, and Tesla, which used the loans fairly wisely. Ford used their share to upgrade several of their assembly plants, Nissan built a factory for producing advanced electric vehicle batteries, and Tesla Motors funded the production of its Model S sedan.

Green Car Loan Program

The Fisker Fiasco

However, not all loans yielded such good results. Fisker Automotive, manufacturer of hybrid vehicles, received $193 million, to fund the production of its luxury sports sedan Karma, which turned out to be a failure, with only 2,500 units sold so far, and two recalls due to technical issues. The company was on the brink of bankruptcy and wasn’t able to pay off the loans. Solyndra, a startup company that used to build solar panels, was in a similar situation, after receiving a $535 million loan, and had to file for bankruptcy in 2011.

In addition to Fisker and Solyndra, there were a few more high-profile bankruptcies, rendering the loan program controversial and largely unsuccessful, which forced the government to cut the funding altogether.

DOE to Refresh the Program

Even though the ATVM program experienced numerous controversies, the government never considered it to be a complete failure, claiming that it helped encourage manufacturers build more fuel efficient vehicles, and now, the Department of Energy plans to reactivate it, in a slightly revised version.

During the Motor & Equipment Manufacturers Association (MEMA) Legislative Summit, Energy Secretary Ernest Moniz said that the DOE intends to revive the program, and announced the changes the Department wants to introduce to the program. He said in a statement: “Motor vehicle parts manufacturers play a significant role in the development and deployment of new technologies to meet the demand for fuel-efficient vehicles and we believe the ATVM Loan Program can play an important financing role as the industry establishes the next generation of manufacturing facilities in the United States.”

Who Will Be Eligible For the Program?

With the refreshed Green Car Loan Program, the government will offer $16 billion worth of loans, which is what is left from the $25 billion that was initially allotted to this program back in 2008. Automakers, as well as automotive suppliers will be able to apply for loans under this program. According to the DOE, companies that manufacture advanced engines and powertrains, lightweight materials, along with manufacturers of advanced electronics and fuel-efficient tires will be eligible for the program.

These types of loan programs, although definitely a bit risky, are necessary for the research and development of new technologies in the auto industry, which can help reduce fuel consumption, as well as vehicle emissions, and curb U.S. dependence on foreign oil.

If you are interested in buying a new or used vehicle, read Buying and Selling Tips first.