Advanced Technology Vehicles Manufacturing Loan Program
Advanced Technology Vehicles Manufacturing (ATVM) Loan Program is a $25 billion direct loan program funded by Congress in fall 2008 to provide debt capital to the U.S. automotive industry for the purpose of funding projects that help vehicles manufactured in the U.S. meet higher mileage requirements and lessen U.S. dependence on foreign oil. Of the 108 requests made, 5 were approved to receive $8.4 billion, with the majority of that amount under repayment.
Background and criteria
The loan program was authorized under section 136 of the Energy Independence and Security Act of 2007, which provided the program with $25 billion in loan authority, supported by a $7.5 billion appropriation to fund the credit subsidy, or the 30% risk profile expected for projects of this type. To qualify, automakers and eligible component manufacturers must promise to increase the fuel economy of their products by 25% over the average fuel economy of similar 2005 models, and apply the loans to future investments "reasonably related to the reequipping, expanding, or establishing a manufacturing facility in the U.S." In distributing the loans the DOE may decide which technologies it believes are most promising and deserving of assistance. Loan recipients must also be "financially viable" for the length of the loan. Given 60 days by congressional statute to issue an interim final rule, the Department of Energy (DOE), responsible for overseeing the program, finalized the rule 36 days later on November 5, 2008 (compared to 18 months usually needed for such rule making). This program is unrelated to the United States Treasury Department's Troubled Asset Relief Program (TARP) which has been providing bailout funding to two of the big three U.S. automakers to reduce the effects of the 2008–10 automotive industry crisis on the United States. The two programs were enacted during the Automotive industry crisis of 2008–10, but with different purposes.
As originally worded, the program was applicable only to four-wheeled passenger vehicles. In October 2009, a bill sponsored by California Representatives Brian Bilbray and Adam Schiff was passed extending the program's coverage to include high mileage (75 mpg equivalent) two- and three-wheeled vehicles.
DOE's Alternative Vehicle Technologies Awards
The U.S. Department of Energy (DOE) announced in December 2008 the selection of six cost-shared research projects for the development and demonstration of alternative vehicle technology projects totaling a DOE investment of up to $14.55 million over three years, subject to annual appropriations. Private sector contributions will further increase the financial investment for a total of up to $29.3 million. The selections announced are part of DOE’s continuing work to develop high efficiency vehicle technologies and are not part of the recently announced $25 billion Advanced Technology Vehicles Manufacturing Loan Program. These projects were selected under three diverse topic areas: lithium-ion battery materials and manufacturing (3M Company for developing advanced anode; BASF Catalyst for domestic production of low cost cathode materials and FMC Corporation for scaling up production of stabilized lithium metal powder for high energy cathodes); thermoelectric heating, ventilation and air conditioning (TE HVAC system); and aerodynamic heavy-duty truck trailers (Navistar International Corporation).
USDOE announced in 2009 $8.4 billion in conditional loan agreements for Ford Motor Company; Nissan North America, Inc.; Tesla Motors, Inc. and Fisker Automotive to fund the development of advanced vehicle technologies. Additionally, DOE has spent approximately $3.3 billion on credit subsidy costs securing the loans. The loan commitments include a $5.9 billion loan to Ford for upgrading factories in five states to produce 13 more fuel-efficient models, a $1.6 billion loan to Nissan to build advanced electric vehicles and advanced batteries, and a $465 million loan to Tesla Motors to manufacture its new electric sedan. These are the first conditional loans released under DOE's Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, which is using an open, competitive process to provide about $25 billion in loans to companies that produce cars or vehicle components in the United States. To qualify, companies must propose projects that increase fuel economy to at least 25% above 2005 fuel economy levels. By 2014, Ford and Nissan were making payments, while Tesla paid back the loan in 2013.
Ford Motor Company will receive its loans through 2011, using the funds to upgrade its engine plants in Dearborn, Michigan; Cleveland, Ohio; and Lima, Ohio, and to upgrade its transmission plants in Livonia, Michigan; Sterling Heights, Michigan; and Sharonville, Ohio. Ford will also upgrade its assembly plants in Chicago, Illinois; Louisville, Kentucky; Dearborn, Michigan; Wayne, Michigan; and Kansas City, Missouri, converting two of the truck factories into assembly plants for cars. In addition, the Ford loans will finance advances in traditional combustion engines and electrified vehicles and help raise the fuel efficiency of more than two dozen popular models. The V6 EcoBoost engine benefited from the loan, and is installed in many cars as well as over 500,000 F-150, saving 268 million gallons of gasoline by 2014.
Nissan aims to manufacture a cost-competitive electric vehicle with a lithium-ion battery pack in Smyrna, Tennessee, and plans to eventually reach a production capacity of 150,000 vehicles per year. The Nissan Leaf is produced at Smyrna since 2013, along with cells for its batteries.
Tesla Motors will use its funding (US$465 million) to finance a California-based manufacturing facility for the Tesla Model S sedan, an all-electric sedan that can be recharged at a conventional 120-volt or 240-volt outlet. Production will begin in 2011 and ramp up to 20,000 vehicles per year by the end of 2013. Tesla repaid the loan in May 2013, and was the first car company to have fully repaid the government, while Ford, Nissan and Fisker had not.
The fourth conditional commitment the Department of Energy has entered into under the ATVM Loan program is a $528.7 million loan for Fisker Automotive for the development of two lines of plug-in hybrids by 2016. Fisker received $192 million, but later defaulted. DOE reclaimed $28 million from Fisker for a total of $53 million recovered of its $192 million loan.
About 108 requests were made to the program by 2010, but few were approved. Many of the companies which were denied loans have since gone out of business. Among the denied were:
- A loan request under this program was denied for Carbon Motors Corporation in March 2012 after the latter had spent 2 years prior addressing the DOE's concerns.
- Aptera Motors' initial application was denied because its product was a three-wheeled vehicle; the wording on the program was modified to allow high-mileage three-wheelers and Aptera reapplied, however the company went out of business before the DOE responded to their second application.
- Brammo asked for $45 million, application was rejected.
- Local Motors' Local Motors initial application (filed in 2009) was rejected, company said to be working on resubmission.
- Bright Automotive, who filed their application in 2008, went out of business in March 2012 after waiting 4 years for the DOE to respond and being unable to sustain continued operations.
- Revolution Motors
- Next Auto Works
- XP Vehicles
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