U.S. President Barack Obama on Wednesday will announce $2.4 billion in grants to developers of next-generation car batteries and parts, aiming to develop a domestic electric-vehicle industry that creates U.S. jobs and reduces demand for oil.

The announcement comes as Obama administration officials fan out across the country to talk up the economy and hail the progress of the $787 billion economic stimulus package, which the White House says is beginning to show results. Obama will take his pitch to Elkhart, Ind., his second appearance in the town, which has been battered by dwindling demand for the recreational vehicles long manufactured there.

Senior administration officials declined to identify the recipients of the money, which represents the total available for batteries under the stimulus package. The applicants included Johnson Controls Inc. (JCI), Ener1 Inc. (HEV), and A123 Systems Inc., whose biggest investors include General Electric Co. (GE). The grants will go, in large part, to Michigan and Indiana.

The U.S. lacks a vibrant car-battery industry, relying on foreign companies for the batteries used in domestically produced hybrid vehicles. The Obama administration wants to change that, predicting that pumping money into an electric-vehicle program will simultaneously create tens of thousands of jobs and help pull the U.S. out of its worst unemployment in more than 25 years.

"It's recapturing the spirit of innovation that has always moved America forward," said Diana Farrell, the deputy director of the National Economic Council, in a call with reporters.

The spending will set up an important test of whether the Obama administration's spending will have lasting results or will prove fleeting. Rechargeable batteries come with challenges, such as recycling and malfunctions. Another issue is how to generate high levels of power from small, lightweight equipment. The U.S. also lacks the infrastructure to allow drivers to recharge their batteries on the road.

The grant money will be a boon to Michigan and Indiana, which have been decimated along with the auto industry. Of 48 projects that are to receive awards, 11 are located in Michigan and seven are in Indiana, according to Matt Rogers, a senior Energy Department advisor. The two states will receive the biggest chunk of money.

That is promising for Johnson Controls, which is building a battery factory in Michigan with support from Ford Motor Co. (F), and A123 Systems Inc., whose manufacturing is largely based in China but which also has plans to build a manufacturing facility in Michigan. A Johnson Controls spokeswoman said that company executives will be on hand on Wednesday in Detroit, where U.S. Vice President Joe Biden is to speak.

Ener1, which has facilities in Indiana, is another company that could benefit. Another award hopeful is Polypore International Inc.'s (PPO) Celgard LLC, a supplier of parts that prevent batteries from shorting by separating the anode from the cathode. U.S. Energy Secretary Steven Chu will appear at Celgard in Charlotte, North Carolina, on Wednesday.

The awards follow intense competition in which battery makers hired lobbyists, appealed to home-state lawmakers, and hired outside consultants. A total of 257 companies applied for the $2.4 billion in grants, with one out of every five projects receiving a grant. Combined, the companies had sought $9.6 billion, many times the amount available.

Michigan - whose U.S. Senators had lobbied hard to add the battery money to the economic stimulus package - may have put itself in an early position to capture the funding. By handing out hundreds of millions of dollars in tax incentives earlier this year, the state provided support that could have been crucial in evaluating the financial status of each applicant. The Energy Department's senior advisor said that companies receiving the $2.4 billion will come up with another $2.4 billion, investments that he said would create tens of thousands of jobs.

-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@dowjones.com