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Is the DOE’s Advanced Technology Vehicle Manufacturing Incentive Stifling Innovation?

Gina-Marie Cheeseman
| Wednesday January 27th, 2010 | 0 Comments

The Department of Energy (DOE) program, the Advanced Technology Vehicle Manufacturing incentive (ATVMI) is meant to stimulate the development of cleaner vehicles (EVs). The Security Act of 2007’s Section 136 created an incentive program of grants and loans to support developing advanced technology vehicles and the parts needed for them. A total of $25 was appropriated for the ATVMI.

However, the ATVMI may actually be stifling innovation. As a December post on Wired.com points out, the ATVMI has a “downside.” The DOE approved loans to Nissan, Ford, Tesla Motors and Fisker Automotive totaling $8 billion. Start up companies are conspicuously absent from the list. In the words of the Wired article, “…this massive government intervention in private capital markets may have the unintended consequence of stifling innovation by reducing the flow of private capital into ventures that are not anointed by the DOE.”

“Startups in particular may face pressure to come up with matching funds for conditional commitments from other investors,” wrote Josie Garthwaite for Earth2tech.

At VentureBeat’s November GreenBeat conference, Kleiner Perkins leader John Doerr highlighted the importance of DOE capital. “If we’d been able to foresee the crash of the market we wouldn’t probably have launched a green initiative,” Doerr said. “The only way in which we were lucky I think is that the government stepped in, particularly the Department of Energy. Led by this great administration that put in place these loan guarantees.”

EV start ups must create alternative plans to ATVMI

Bright Automotive is one start up that applied for an ATVMI loan. Bright built a plug-in hybrid commercial van, called the Idea, that could be driven for 41 to 43 cents a mile. The Idea is clad in aluminum and has 40 miles of all-electric range. However, as Bnet pointed out, there is only one Idea prototype.

Here’s a video on the Idea:

Companies like Bright who didn’t receive ATVMI loans will have to go with plan B, as a BusinessWeek article put it. The article reports:

The backup plans that have emerged so far include outsourcing manufacturing, pursuing more private equity investment, and establishing less-capital-intensive sources of revenue. We may start to see more strategic alliances and partnerships taking shape among green-car startups and manufacturers as well.

The BW article also reported that Bright “has pursued other sources of revenue.” In October 2009, the company launched a consulting business called Bright eSolution. The consulting business received $1.4 million for a demo project with the U.S. Army’s department of Tank-automotive and Armaments Command to test its plug-in hybrid vehicles for non-combat situations.

Bnet reported that the Idea “has drawn interest from a variety of commercial customers, including Frito-Lay, Coca-Cola and FedEx.” Before Bright is able to “make sales” it has to “raise capital for final testing and to build manufacturing capacity.” According to Bnet, “that capital is, increasingly, available from foreign partners.” In fact, Waters told Bnet that Chinese and other foreign investors have shown interest, but he would “prefer to build the Idea in the U.S.”

“I believe we have a solid business plan, solid investors, solid solutions,” Waters said. “But our funding in the U.S. has been delayed while other countries are wooing us. We’ve held out, but now we’re returning their calls. We’re losing faith in Capitol Hill.”


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