"IAM absolutely committed to working with Congress and the auto companies to meet one goal: the United States of America will lead the world in building the next generation of clean cars," declared President Barack Obama the other day when he announced his administration's plan to nationalize the American automobile industry. What does he mean by "clean cars"? During the presidential campaign, candidate Obama promised to enact a $7,500 tax credit for new plug-in hybrid electric vehicles (PHEV), vowing to "put 1 million Plug-In Hybrid cars—cars that can get up to 150 miles per gallon—on the road by 2015, cars that we will work to make sure are built here in America." In February, the promised $7,500 PHEV tax breaks were included in President Obama's $787 billion stimulus package.

Americans are already familiar with gas-electric hybrid vehicles like Toyota's Prius, which uses nickel metal hydride (NiMH) batteries to power an electric motor that assists its gasoline motor and increases its gas mileage. The batteries are recharged by both the gasoline engine and by capturing energy used during braking (regenerative braking). For example, the Environmental Protection Agency rates the Prius at 60 miles per gallon (mpg) in the city and 51 mpg on the highway. Introduced in 1997, over 1 million have been sold worldwide, 600,000 of them in the United States. Despite their improved gas mileage, however, current-generation hybrid automobiles, including the Prius, are still essentially gasoline-powered vehicles.

That's where plug-in hybrid electric vehicles come in. PHEVs flip the current hybrid formula—instead of gas-powered cars assisted by electric motors and batteries, PHEVs will be electric-powered cars assisted by gasoline motors. Ideally, PHEVs would mostly run on electricity from batteries using their gasoline motors as range-extenders to charge the batteries after they've run out of juice. In a world of PHEVs, gasoline stations would go the way of livery stables since cars would get most of their energy by plugging them in at home at night or at parking garages and meters during work hours.

If most Americans switched to driving PHEVs, imports of foreign oil would fall. So would emissions of the greenhouse gases thought to be warming the planet. But by how much? A 2007 study by the Department of Energy's Pacific Northwest Laboratory sketched out a scenario in which 84 percent of cars, light trucks and SUVs (about 200 million vehicles) were PHEVs traveling an average of 33 miles per day on electric power. In that scenario the country would reduce its consumption of oil by 6.5 million barrels per day—which is equivalent to 52 percent of current U.S. petroleum imports. Greenhouse gas emissions would be cut by as much as 27 percent.

Will our freeways soon be clogged with high-tech cars propelled mostly by electricity? The floundering automaker, General Motors, has promised to bring its Chevy Volt PHEV to market by 2010. Not to be left out, Ford and Chrysler have also announced plans to sell PHEVs in the next couple of years. Big automakers around the world are also promising that consumers will be able to drive their plug-in hybrids and electric vehicles in the next two to three years. Among them are Nissan-Renault, Daimler-Benz, BMW, Mitsubishi, Toyota and the Chinese manufacturer, BYD. In addition, numerous startups—including the Silicon Valley–based Tesla Motors and others such as Think, Fisker, Aptera, Zenn and Phoenix Motors—are hoping to do an end-run around the stodgy majors.

However, without a plentiful supply of reliable long-range batteries, all such promises of a glorious electrically driven future are just so much hot air. Conventional NiMH batteries are OK for the quick charge and discharge of today's gas-electric hybrids, but they can't hold enough charge to take a car very far on its own. For more distance, carmakers are looking to the same battery technology that animates our laptops and cell phones: lithium-ion batteries, which hold a much greater charge and weigh much less than NiMH or conventional lead-acid batteries.

Surveying the world, it is clear that foreign manufacturers are currently in the lead when it comes to making lithium-ion batteries. In January, GM announced that it would use lithium-ion batteries produced by the North American subsidiary of the Korean chemical giant, LG Chem, in its Chevy Volt. LG Chem beat out A123 Systems, a lithium-ion battery maker headquartered in Watertown, Mass. In February, Ford announced that the batteries for its PHEV and electric vehicles would be supplied by a joint venture between Wisconsin-based Johnson Controls and the French battery producer Saft Groupe SA. The actual batteries will not be manufactured in the United States but in Saft's factory in Nersac, France.

To play catch-up, the Obama administration's $787 billion stimulus package authorized the Department of Energy to spend $2 billion on grants for advanced battery research. In addition, would-be American battery manufacturers can partake of the $25 billion Advanced Technology Vehicles Manufacturing (ATVM) loan program launched last September when the panic over the economic meltdown first took off.

Worldwide, this manufacturing optimistically adds up to—at most—enough to produce up to 2 million PHEVs per year by 2015. In 2007, automakers globally produced 70 million vehicles powered by standard internal combustion engines. The global fleet currently numbers 810 million vehicles, of which 240 million travel on American roads. Clearly, cars powered mostly by electricity will constitute a tiny proportion of the world's vehicles for some time to come.

What about further down the road? If Europe imposes stringent carbon controls on automobile emissions to address global warming, Wolfgang Bernhardt, a partner at Roland Berger Strategy Consultants in Stuttgart, Germany, told Automotive News in November, "I can see up to 3 percent of all cars being pure electrics by 2020, with a further 19 percent being plug-in hybrids." Alan L. Madian, director of consulting firm LECG, told the Washington Post that, even with "heroic" assumptions, by 2030 new electric cars would only make up 50 percent of new vehicles being sold and only 8 percent of cars on the road.

The 2007 Department of Energy PHEV study found that when compared to 27.5 miles per gallon internal combustion vehicles, the break-even premium for a PHEV at $2.50 per gallon is $3,500 when electricity costs are $0.12 per kilowatt hour. At $3.50 per gallon, the premium rises to more than $6,500. Since batteries are expected to boost the average cost of each vehicle by as much $10,000, gasoline will have to cost more than $5 per gallon before PHEVs make economic sense to most drivers. Of course, generous federal subsidies can help overcome this financial disincentive. The government could also double or triple gasoline prices by imposing a substantial tax.

In 2006, an activist "documentary" about GM's ill-fated foray a decade ago into battery-powered cars, the EV1, asked, "Who killed the electric car?" The filmmaker offered an elaborate conspiracy theory involving oil companies, but the truth is that clunky inefficient batteries did the electric car in. And unless there is a spectacular breakthrough in electricity storage technology, clunky expensive batteries will likely kill the electric car this time, too.

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