The £230 million promised by the Labour government to subsidise the cost of new electric cars from 2011 could be scrapped by the new coalition Government.
The Conservative/Lib-Dem Government has ordered a review of all spending commitments the Labour administration made late into its final term.
The subsidy, which would cut up to £5,000 off the cost of a new electric car, was promised by Alastair Darling when he was at Number 11 in April 2009.
However, a Treasury spokesman confirmed the subsidy has been put under review because the financial commitment was contained in April’s Budget announced just before the General Election.
He said: “Any spending commitments announced since January 1 is being reviewed and this falls into this.”
He added that the Department for Transport (DfT), which is responsible for administering the subsidy, was given just days to get all relevant documents to Treasury so it could begin the review.
There is no official date for a decision, but an announcement is expected before the Emergency Budget on June 22.
However Nissan, which will launch its Leaf electric car onto the UK market next year to coincide with the planned introduction of the new subsidy, said: "We believe we have a legally-binding agreement with the Department for Business, Innovation and Skills, and like everyone else we are awaiting the outcome of the Government's review."
The Society of Motor Manufacturers and Traders (SMMT) said it remains hopeful the subsidy will be saved, and its policy team will meet with DfT and the Office for Low Emission Vehicles within days to discuss its future.
Mitsubishi and Nissan have already published their electric car prices to include the subsidy. Mitsubishi’s i-Miev will rise to £38,699 if it is scrapped, while Nissan’s Leaf will cost £28,350.
Mitsubishi said it will be "disappointed that this funding has been removed at such a crucial stage of establishing an early market for electric vehicles in the UK”.