'We can let the jobs of tomorrow be created abroad or we can create them here in America and lay the foundation for lasting prosperity,' Mr Obama said on the second day of a campaign-style swing in California.

Mr Obama said the money would be used to develop next generation plug-in hybrid electric vehicles and advanced battery components and would create tens of thousands of US jobs and reduce reliance on foreign oil.

He set a target of putting a million of the environmentally friendly vehicles on US roads by 2015.

The plan would also give a US$7,500 tax credit to people who buy plug-in hybrid vehicles, Mr Obama said, as he toured a plant in southern California developing the new generation transport.

'The nation that leads on energy will be the nation that leads the world in the 21st century,' Obama said.

'That's why, around the world, nations are racing to lead in these industries of the future.'

The president bemoaned the fact that the US lagged behind some of its key European and Asian trading partners in the race to develop new generation fuels and vehicles.

'Germany is leading the world in solar power,' he said.

'Spain generates almost 30 per cent of its power by harnessing the wind, while we manage less than one percent and Japan is producing the batteries that currently power American hybrid cars.' -- AFP