U.S. Li-ion Auto Battery Maker Ener1 Voices Support for $1.6 Billion Federal Grant to Propel Electric Vehicle Technology

A new plan proposed this week by Indiana Senator Evan Bayh involving $1.6 billion in federal grants to accelerate growth of America's advanced hybrid-electric and electric car industry is crucial for American competitiveness in automotive and high-tech manufacturing, Charles Gassenheimer, Chairman and CEO of Ener1, Inc. (Amex: HEV), said today. Ener1's Indianapolis subsidiary EnerDel is the first company able to produce automotive lithium-ion batteries on a commercial scale in the U.S.

Gassenheimer stood with the Senator for a press conference today at the Indianapolis Motor Speedway.

"Senator Bayh's plan could not come at a more critical time," commented Gassenheimer. "We think it will pay for itself many times over," Gassenheimer said, comparing advances in the rapidly emerging sector to the birth of America's Silicon Valley computing industry. "This is a high-tech, high-growth, high-value industry, invented right here in America, and Indiana is at the center of it. The priority now to build the production capacity we need before foreign competitors beat us at our own game."

Senator Bayh discussed his proposal today at an event gathering many of the state's top auto-tech manufacturers at the Indianapolis Speedway. The legislator, who is one of the Congress's leading champions of U.S. energy security and alternative fuel automobiles, has offered his plan to the Senate majority and minority leaders, co-signed by 11 other senators.

Automakers around the world have dozens of new hybrid models already in the pipeline, but almost no current sources for batteries to power them. The rush is on in Europe, Japan, Korea and China to capture their shares of a market that could be worth as much as $150 billion a year within a decade, some analysts say. U.S. carmakers worry that without a domestic battery supply chain they could find themselves at the back of the line, or forced to pay steep premiums.

"Viability of the American auto industry depends on the decisions and the investments we make today," Gassenheimer said. "The last thing we want is to trade dependence on foreign oil for dependence on foreign batteries. Senator Bayh is proposing a down payment on our long-term competitiveness and security. We deeply appreciate and commend the energy and vision he is bringing to this incredibly important goal."

While costs remain a challenge for the advanced battery industry today, Gassenheimer believes full-scale production could cut current prices by half. EnerDel is currently undergoing a major expansion at its two Indiana facilities.

Sen. Bayh's proposal to provide $1.63 billion in federal grants through the U.S. Department of Energy is designed to ramp up production and drive down costs of hybrid and electric drive systems. The package includes:

-- $1.0 billion in competitive grants to expand the U.S. manufacturing base for advanced batteries and other essential components.

-- $295 million for R&D on new battery technology.

-- $90 million in grants for state and local business and governments to build the infrastructure and other resources such as rapid-recharging stations to support plug-in and other technologies.

-- $95 million in grants for near-term truck and maritime port electrification, which saves energy and dramatically cuts dangerous pollution.

-- $150 million for research and development of "smart-grid" technology that can save consumers money and help integrate plug-in vehicles while improving capacity and reliability of the nation's aging electric system.

By comparison, Gassenheimer points out that Japan's combined public and private investment in advanced battery development has outpaced that of the United States by as much as 10-fold for most of the past decade. Some in the industry are already worrying about what an emerging "battery gap" might mean for their ability to procure enough of these essential components for fuel- efficient autos.

Toyota already owns a major stake in Panasonic's battery business; Honda and Mercedes Benz have just entered into new joint lithium-ion battery ventures.

"This is only the eye of an energy price storm," Gassenheimer said. "We're getting a temporary break at the gas pump right now, but it's only going to last as long as the economic downturn. Then we're right back to facing devastating price shocks. Industry and government increasingly appear ready to move forward together and that means we will prevail economically and in guaranteeing our energy security."

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About Ener1, Inc.:

Ener1 develops and manufactures compact, high performance lithium-ion batteries to power the next generation of hybrid and electric vehicles. The publicly traded company (Amex: HEV - News) is led by an experienced team of engineers and energy system experts at its EnerDel subsidiary located in Indiana. EnerDel has developed proprietary battery systems based on technology originally pioneered with the assistance of the Argonne National Lab.

Ener1 is seeking to become the first company to mass-produce a cost- competitive lithium-ion battery for hybrid and electric vehicles. Demand for battery solutions is being driven by a need to reduce dependence on oil as well as growing concern about vehicle emissions. In addition to the automobile market, applications for Ener1 lithium-ion battery technology include medical, military, aerospace, electric utility and other growing markets.

Major shareholders of Ener1 include Ener1 Group, Inc., a privately held, global investment and advisory firm, and ITOCHU Corporation, a Japanese trading company and distributor of manufacturing equipment essential to lithium-ion battery production. ITOCHU has annual revenue of approximately $90 billion and offices in more than 80 countries. Ener1 has also received funding from a growing number of institutional investors.

In addition to battery technology, Ener1 develops commercial fuel cell products through its EnerFuel subsidiary and nanotechnology-based materials and manufacturing processes for batteries and other applications through its NanoEner subsidiary.