A U.S. government initiative that would see low-interest loans granted to automakers who build environmentally-friendly cars in the U.S. appears to have one taker – Nissan. The Japanese automaker will spend anywhere from $500 million to $1 billion to update its Smyrna, Tennessee plant to build a green car and produce lithium-ion batteries.

While no specifics have been given the environmentally-friendly car is expected to be an electric vehicle based on an existing Nissan small-car platform. That leaves either the Versa or the new third-generation Cube. Nissan is currently testing an electric powertrain in a second generation Cube.

The Smyrna, Tennessee plant will be able to produce anywhere from 50,000 to 100,000 of the electric vehicles annually by 2012. Nissan will begin electric car production in Japan in late 2010, with an expected annual production of 50,000 units.

[Source: Reuters]