Updated: Mixed signals fuel uncertainty over electric car incentives

A proposed subsidy scheme that would offer motorists up to £5,000 off the price of new electric vehicles could still be axed, despite the fact that the scheme has survived the coalition government's initial spending review.

Following the first wave of Treasury spending cuts earlier this month, a government spokesman said the coalition had approved plans for the new incentive scheme which is expected to launch early next year.

However, in comments made at the annual SMMT auto industry conference earlier today, business secretary Vince Cable signaled he would like to see an end to large-scale subsidies for the automotive industry, adding that the electric vehicle incentive scheme was still under review.

BusinessGreen.com has learnt that the funding to set up the electric car incentive scheme during 2010/11 was approved by the Treasury as part of its initial review of all spending decisions made by the previous government since the start of the year.

But it has not yet approved the budget for the scheme for 2011/12 and a final decision is now not expected until the public spending review in October.

Whitehall insiders said the scheme had passed the Treasury's initial "value for money" test, but its future was still not assured and the Department for Transport would be forced to pull the plug on the incentives if the additional funding for 2011/12 is not approved.

Electric vehicle manufacturers planning to launch new electric models next year had incorporated the proposed subsidy into their pricing decisions and are privately frustrated by the continued uncertainty surrounding the scheme.

A spokeswoman for Nissan, which is planning to build an electric vehicle manufacturing plant in Sunderland, said the company was engaged in constructive talks with the government about the future of the incentive scheme.

"We are pushing strongly that the incentives should be maintained," she said. "We believe it is a key part of the introduction of electric vehicles to make people feel they can afford them and then [the incentives] can be phased out as we mass-produce the cars and bring costs down."

She added that the company would welcome a decision on the future of the scheme "sooner rather than later", noting that with its flagship electric Nissan Leaf due to launch early next year, the company would be taking pre-orders in the coming months.