US President Barack Obama announced a $2.4-billion plan on Thursday to promote hybrid vehicles and reduce dependence on foreign oil.
The initiative allows companies to apply for grants administrated by the Department of Energy to develop better batteries for hybrid electric vehicles and related technologies and components.
Obama announced the plan while visiting electric power company Southern California Edison's electric vehicle centre in Pomona, just outside downtown Los Angeles.
"Show us that your idea or your company is best-suited to meet Americas challenges, and we will give you a chance to prove it," Obama said.
The funding comes from Obama's $787-billion stimulus package designed to pull the economy out of the recession and create jobs. The programme includes $400 million to support building infrastructure for hybrid and electric vehicles.
California, the country's most populous state and heavily dependent on cars for getting around, has led the United States in seeking fuel efficient cars and has some of the toughest anti-pollution laws.
But the state has been hit particularly hard by the recession, facing budget shortfalls and has one of the highest home foreclosure rates in the country.