American drivers want electric and plug-in hybrid vehicles. American automakers want to sell them those cars. The U.S. government really would like those cars to be powered by American-made batteries. But is it wise for the Department of Energy to loan a startup $480 million to build the battery manufacturing plants?

EnerDel, a lithium-ion battery maker founded in Indianapolis in 2004, announced that is has applied for $480 million in federal loans to build battery manufacturing plants. The company, which has raised $200 million to date, said in a press release that the money is needed because it" acknowledges federal assistance is necessary for (parent company) Ener1 to accelerate its production capacity to be able to meet the U.S. auto industry's current forecasts for hybrid and electric vehicles, and remain competitive in a rapidly evolving global marketplace."

However, the demand for plug-in hybrid and all-electric vehicle batteries in the next few years is highly speculative. Ener1's highly publicized contract to provide vehicle batteries -- a $70 million deal with Think Global-- is in jeopardy, as the Norwegian EV maker ran out of cash and had to halt temporarily production of its vehicles. According to the Indianapolis Star, the company has other contracts for large and industrial vehicles, and with a European carmaker.

EnerDel may be asking for more money that it needs if you consider projected sales of the first plug-in hybrid and the sales of hybrid vehicles to date. Ener1 said the government funds "will enable EnerDel to double manufacturing capacity to produce 600,000 hybrid electric vehicle packs per year at its existing plant by 2011."

General Motors, which is vying to be first in the U.S. to offer plug-in hybrid vehicles, has reportedly chosen Korea's LG Chem to produce lithium ion battery packs for the Chevrolet Volt. Toyota, the largest seller of hybrid vehicles, has a joint venture with Panasonic for its vehicle batteries.

Toyota took 10 years to sell one million hybrids, while the monthly volume of all hybrid vehicles slipped in Novemberto just 16,571 units, or less than 200,000 annually.

Plug-in hybrids could cost nearly twice as much as hybrid vehicles, and the market will be starting from scratch at the end of 2010, when GM expects to start shipping Volts. Only 10,000 Volts will be made during the first year, and production will max out at 60,000 per annum, according to Reuters.

EnerDel applied for the DOE funds through the Advanced Technology Vehicle Manufacturing Incentive Program (ATVMIP), which was established by Congress in 2007.