Legislators say the United States today has no large-scale production plant for the lithium-ion battery, the technology General Motors Corp. expects to power its touted Chevrolet Volt. Most battery technology is being developed in Asia.

“It is imperative that Michigan possess this technology to keep Michigan the center of car manufacturing,” said Sen. John Pappageorge, a Troy Republican.

Before adjourning this month, the Legislature approved tax credits worth up to $335 million depending on how many battery packs are assembled here, production expenses and other factors. Granholm is expected to sign the legislation.

Lawmakers were motivated to act at a time auto demand has dropped due to the ailing economy and the credit crunch, which has made it tougher for some buyers to get financing. GM and Chrysler LLC recently secured a $17 billion lifeline from the federal government.

The same week lawmakers voted for the credits, GM announced it was delaying construction of a Flint engine factory to conserve cash. The plant eventually will make 1.4-liter engines for the Chevy Cruze and the Chevy Volt plug-in electric car, key products in the century-old automaker’s bid to turn itself around after relying on highly profitable truck and SUV sales.

“That’s just temporary,” Granholm said. “They are going to produce the Volt. … The battery that is going to power the Volt — we intend that to be made in Michigan.”

GM could make a decision early next year. The state also is working with a cell manufacturing company to build a facility in Michigan.

The governor says the rechargeable lithium battery not only will store energy in people’s cars but could be used for their homes and businesses, too.

“All of that we want to make a big play for Michigan,” Granholm said. “We want it to be an American solution produced by American workers.”

Things are moving quickly on the battery front.

Fourteen U.S. technology companies and a national laboratory this month created an alliance to seek billions in federal funding for construction of a plant to make advanced vehicle batteries. The U.S. will lose out on high-tech jobs if Japan, South Korea and other countries continue dominating battery development, according to the new coalition.

Michigan’s tax incentives are similar to those offered the film industry earlier in 2008. To entice moviemakers to choose Michigan over competing states, Granholm and legislators created refundable tax credits for in-state movie production expenses.

Giving tax breaks is nothing new, with the state often deciding to forgo tax revenue in exchange for economic investment and job creation. But refundable credits go further. They are more like a rebate for production expenses and can require the state to cut checks to businesses if the credits exceed their tax liability.

Refundable credits have been castigated by critics such as state Sen. Nancy Cassis, a Novi Republican who has said Michigan would be more attractive if it provided “broad-based tax relief … benefiting all, rather than just a selected few.” The criticism mostly has been ignored. Senators scaled back the battery bill’s potential price tag by nearly $200 million before voting 31-3 to pass the legislation. It was approved 94-0 by the House.

Backers say Michigan just cannot afford to miss out on a vehicle battery market that could total $50 billion by 2020, and call the tax incentives a “down payment.”

Compact Power is the Detroit based unit of LG Chem, the South Korean giant, which is in the running to win the bidding for the battery supply contract of the upcoming Chevy Volt.

Patil confirmed GM is going to make a decision on a single battery supplier by the years end. The shares of that company will most likely skyrocket, as GM has already announced it will be losing money on the first generation Volt, therefore financial constraints will play a minor role compared to reliability in the selection process.

GM is on track to release the new Chevy Volt in November 2010.

Patil expects lithium-ion technology batteries to dominate the market for the next 15 to 20 years in the automotive sector.

Compact Power is in talks with other vehicle manufacturers as well to land lucrative contracts in the battery business. Projections for the company look stellar provided they are able to meet stringent supplier requirements and their product performs. Patil pegs the sales projection at $1 billion over the next 10 years, as the hybrid vehicle industry picks up steam.

Tesla, most widely known for it’s green car based on a Lotus, has been getting a lot of positive publicity lately for it’s efforts in building electric vehicles. Endorsed by Governor Arnold Schwarzengger, who happens to own one along with several famous personalities, the new upcoming model is sure to be a hit.

Tesla has just recently rolled out it’s powerplant 1.5, which promises more power, a different transmission to improve both range and speed.

Tesla Motors is a couple of months away from locking up $100 million in private equity financing, as well as $150 million in government funding provided by the U.S. Department of Energy. On top of all this, the state has also offered Tesla significant tax breaks in order to help the company get off the ground.  So Tesla has absolutely no reason, why it should not be a serious contender in the full electric game. The company has plenty of money, plenty of talent, recruited from Chrysler and other prestigous automotive related companies and plenty of demand for it’s products.

Other carmakers such as GM with its Chevy Volt and Toyota, will be competing against Tesla, however Tesla seems to have a head start on the game, as it’s already selling it’s Roadster, whereas the competition is still years away.