The coalition Government has announced the electric car subsidy – which offers buyers up to £5,000 towards the cost of an electric car – will go ahead next year.

The former government had vowed to set aside £250,000 to the scheme, which had been scheduled to come into effect next year. But there were concerns the grant would be scrapped when Business Secretary Vince Cable warned the new Government would rein in financial support for the British motor industry.

The grant, confirmed today by transport secretary Philip Hammond, will launch in January and will apply to all motorists buying an electric, plug-in hybrid or hydrogen fuel cell car.

The subsidy is for 25 per cent of the purchase price of any electric car, up to a maximum of £5,000. This means the Nissan Leaf will cost £23,350 when it goes on sale early next year, while the Mitsubishi i-MiEV city car will cost £33,699 with the grant.

A total of £43 million has been set aside for the first phase of the scheme up to March 2012 – enough for 8,600 cars.

Renault UK’s Managing Director Thierry Sybord said of today’s news, “We’re convinced that our range of 100 per cent electric cars and vans are going to appeal to a wide cross-section of private individual and business customers in their own right, with an exciting combination of innovation, style and technology.

Full gallery: Nissan Leaf

“Now, with this financial incentive in place, their affordability and lower running costs make the financial argument for electric vehicles, compared to conventional fossil-fuelled vehicles, as compelling as their environmental one.

“As a result of this morning’s news, we are even more excited about encouraging as many people as possible to consider using electric vehicles to drive down vehicle emissions, or as we say here at Renault, ‘Drive the Change’.”

By Rhian Angharad Jones