CAR maker Nissan, which is to produce the Leaf electric car at its Sunderland plant, last night welcomed the Government’s decision to retain a financial incentive to buy the vehicles.

Transport Secretary Philip Hammond confirmed yesterday that motorists will receive up to £5,000 towards buying an electric or hybrid electric plug-in car from next January until at least March 2012.

It comes as the North-East positions itself as a hub for electric vehicle expertise, with Leaf production in the region from 2013 destined to create thousands of jobs.

There were fears the subsidy scheme, first announced by the Labour government in February, was set to be scrapped after Business Secretary Vince Cable told the Society of Motor Manufacturers and Traders last month: “We’ve moved on from the era of subsidies.”

A decision from the Treasury on the future of the scheme had not been expected until the public spending review in the autumn.

But there has been intense lobbying by Nissan and other leading carmakers, which wrote to the Government warning that it risked jeopardising the UK electric vehicle market.

Last night, a Nissan spokeswoman said: “We are really pleased that the Government has come out now and said the incentive will stand.

“They have announced £43m for the fund and obviously, that is different to the Labour government, which was talking about five years with a pot of about £230m, but we are confident it won’t end there.

“They are going to review it on an annual basis based on the market situation and we are comfortable with that.”

Nissan believed that while many early adopters of the vehicle would be prepared to pay £23,990 for the car, they would not be as willing to stump up the full £28,990 cost of the Leaf.

The spokeswoman said: “For the first two to three years, incentives are very important, so we can ramp up global production and bring down the cost for the car.”

The Japanese car manufacturer has been unable to start promoting the launch of the Leaf, which goes on sale in the UK in March, until it knew what was happening.

The spokeswoman said: “We weren’t able to start preorders until we had clarity with the incentives. That will probably be in the coming weeks.”

As well as the Leaf, the North-East, which is the UK’s economic area for low-carbon vehicles, will be home to a £8.4m national skills academy for sustainable manufacturing.

There are also 1,300 charging points being installed and an electric car battery plant being built at Nissan’s Sunderland factory.

Dr Colin Herron, manufacturing and productivity manager at regional development agency One North East, which has played a key role in the region’s electric vehicle plans, said: “The subsidy will go a long way to underpinning the low-carbon vehicle strategy in the North-East and, together with Nissan’s recent investment, ensures the region will remain at the forefront of electric vehicle technology here in the UK for years to come.”

Mark Stephenson, policy advisor at the North East Chamber of Commerce, said: “In economic terms, the North-East is already a leading player in low-carbon technologies and so is well placed to benefit not only from environmental impacts but also the business and job opportunities that the low carbon automotive industry will bring.”