Tata Motors has warned the Government it will scrap plans to build electric vehicles in the UK if it does not receive funding soon.
The company is annoyed it has not received a £10 million loan from the £2.3 billion car assistance package announced by ministers in January, reports The Observer.
Tata was told last week by Lord Mandelson's business department, which is overseeing the distribution of the package, it would need more time to find out if the venture would be considered for the loan.
The news comes the day after business secretary Lord Mandelson announced the UK's "low carbon industrial strategy" which is aimed at helping manufacturers who develop technologies for electric cars.
Tata Motors registered its interest in the £10m loan to help launch the new Vista electric vehicle and build an assembly line for it in the UK.
However last Tuesday the business department told the company it will take a further eight weeks for it to decide whether the carmaker had met the criteria to be considered for the loan.
Meanwhile, Tata Motors also remains in deadlock with the department over securing support for Jaguar Land Rover.
The firm secured a £292m loan from the European Investment Bank in April but this needs to be guaranteed by the government and the two sides still cannot reach agreement on the conditions.