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Department of Energy says 'no' to Carbon Motors' loan request for police car

Carbon Motors E7

Carbon Motors

The police car of the future has hit a major bump in the road.

Carbon Motors announced Wednesday that the Department of Energy has informed the Indiana-based startup automaker that it is no longer considering its $310 million loan application to the Advanced Technology Vehicle Manufacturing program.

The company planned to use the money to produce a purpose-built, fuel-efficient law enforcement vehicle called the E7 for police and homeland security use.

Carbon Motors spokesman Stacy Stephens tells FoxNews.com that the company was blindsided by the decision after being engaged in positive discussions with the government agency for the past 30 months, having recently been told by officials that it was “the number one priority of the Department of Energy.”

When Energy Secretary Steven Chu visited Indianapolis on Monday, he told reporters that the department wanted to go forward with the loan but that it has “a responsibility to the taxpayers and they need to make sure it’s written in the statute that there's a reasonable chance of repayment,” according to WIBC radio.

Stephens says that the company has sourced over $200 million in private matching funds as part of the loan requirements and began constructing a new headquarters building in Connersville, Ind., where the car was to be manufactured at a former brownfield site, creating over 1,500 jobs.

The automaker’s CEO, William Santana Li, says his company is outraged by what it calls a “political decision in a highly charged, election-year environment,” caused by the fallout from the bankruptcy of Energy loan recipient Solyndra last fall.

The move by the Energy Department comes one week after another Indiana startup working on a plug-in hybrid van, Bright Automotive, closed down after dropping its pursuit of a similar loan it originally applied for in 2008, saying it could no longer wait for the agency to act on the application.

Read: GM-backed electric car company folds, slams DOE loan process

Carbon Motors has no plans to shut down at this point and says it is “examining strategic and financing alternatives.”

“We were hit right square in the nose from the federal government and need to dust off and regroup,” Stephens says.

Read: Can Carbon Motors survive without government loan?