You would think, reading the claptrap about why the federal government is giving $34 million to Ford, that there was no such thing as an electric car and that the world was not rushing towards switching from petrol to electricity for transportation.

But it’s not too late: any handout to General Motors must be tied to a commitment to build an EV in Australia. The government has already helped fund a proof-of-concept electric Commodore that has now been built by Australia’s parts manufacturers; it needs to follow up by making any further cash payments to GM conditional on it actually being produced here.

If car industry handouts are not tied to making EVs in Australia, the government will be making a huge bet on the future of Australian manufacturing, and possibly consigning the Australian car industry to the scrap heap.

The problem, of course, is that Australia is in bed with Detroit, which remains part of the global oil supply chain and profoundly conflicted about moving to EVs.

The Australian Minister for Manufacturing, Kim Carr, was at the Detroit Motor Show this week to announce that his government is giving $34 million to Ford, and presumably he’s over at GM now trying to get them down from the $200 million that they have started their public bargaining with.

The two American car companies have long had a nice racket going in Australia, where every few years they solemnly threaten to close down production of cars here and whichever government is in power, federal and state, in a panic, quickly hands over envelopes of cash, no interest, no repayment, no conditions – beyond continuing to build cars that fewer and fewer people want to buy.

The joint press release from the prime minister and Kim Carr about the Ford handout said: “With a rising dollar and fierce competition from other countries in our region, we need to be investing in manufacturing products that are innovative and competitive.”

First, it’s not an investment but a handout, a ransom, and second, internal combustion engines and cars that contain them are neither innovative nor competitive, even if they are more fuel efficient.

Ford is not working on an EV. Meanwhile GM’s fully electric vehicle, the Volt, was named the 2011 car of the year. It hoped to sell 10,000 Volts last year but its Chevrolet dealers only managed to sell 7,671, so the tone of discussion around the subject at the Detroit Motor Show this week has been: “see, we told you these things wouldn’t sell”.

Considering there isn’t yet a network in place to charge them, I would have thought selling even that many was pretty interesting.

But no one has any idea whether EVs will replace petrol-driven cars, and if so how quickly; any prediction can look both ludicrous and credible at the same time. One thing is for sure though: any car manufacturing industry that bets entirely on petrol is taking a big risk.

The price of batteries is falling rapidly and the decline in price will accelerate once production starts ramping up. Better Place will start rolling out charging stations and monthly subscriptions plans for electricity later this year, and several EV models are already on the market here with more to come this year and next.

EVs are clearly better than petrol-driven cars. They are quieter, faster and cheaper to run; if they don’t eventually entirely replace internal combustion cars, I’m an oil well.

At a factory in Port Melbourne, just up the road from General Motors Holden, a group of parts makers led by Better Place and Futuris have built a Holden Commodore EV at their own expense – with some money from the government – to prove to GMH and the government that it can be done cost-effectively, and they are now driving it around. They have also built a Ford Territory EV.

By all accounts the Australian engineers at GM are interested, but the word from headquarters is that if EVs are going to be built, it’ll be in Detroit, thanks very much. Kim Carr has a chance now to refocus their minds.

** This article first appeared on Business Spectator.