UK to spend £7bn on electric cars by 2014

Britain's motor industry is in line for a £7bn boost from electric cars between now and 2014, according to a survey to be published this morning. Yet, in the short term, dealerships face a "fraught" 2011, as the stuttering economy and subdued consumer confidence drag sales down by as much as 10 per cent on last year, a leading industry expert warns.

The survey of 5,000-plus drivers by GfK Automotive found 1.8 per cent of people would "definitely" buy an electric car by 2014, equating to more than 300,000 electric cars if extrapolated over the total car-buying population of 19.8 million households.

Using the newly released all-electric Nissan Leaf as a benchmark, the market will be worth £7.2bn by 2014, GfK Automotive says. And another 3 per cent of respondents – equating to 500,000 of all car-buyers – say they would consider going electric in the future, once concerns such as battery "range anxiety" are addressed.

Electric cars may be a smooth ride in the longer-term but in the more immediate future the car industry is facing yet another bumpy road. Although a slight drop in sales compared with last year has always been expected, the tricky economic situation spells problems for 2011, according to Professor Garel Rhys from the Centre for Automotive Industry research at Cardiff University.

Professor Rhys, a leading authority on the British car industry, says sales could drop back to as low as 1.8 million this year, 10 per cent down on the 2 million sold in 2010, and also some way below the 1.93 million forecast by the industry trade body, the Society of Motor Manufacturers and Traders.

Alongside rises to VAT and national insurance contributions, the biggest danger to Britain's car-buying is from the decline in real income levels as rocketing inflation far outstrips wage increases, Professor Rhys said.

"Given that cars are so income-elastic, the developments in the economy are not going to be underpinning the car market at all over the coming year," he said. "All the industry will be able to do is to minimise the decline."

The Office of National Statistics published GDP figures this week showing a 0.5 per cent drop in output in the last three months of 2010. Even accounting for the hit from the cold snap just before Christmas, economic growth in the period was estimated to be "flattish" at best, raising fears that the recovery is too weak to withstand the swathes of public spending cuts outlined by the Chancellor in the autumn.

"Whether we are technically going into a double dip or not is academic," Professor Rhys said. "What we are going to get, at best, is anaemic growth, which for a lot of people will feel like recession because jobs will be lost, incomes squeezed and so on."

But not everyone is so gloomy. Despite car sales numbers in steady decline for the last six months, and the threat from the worse-that-expected end-of-year GDP numbers, the industry is well prepared for a difficult start to 2011.

"Conditions are tough and were always going to be but we are still expecting improvements in the second half of next year," Paul Everitt, the chief executive of the SMMT, said. "We must grit our teeth and not panic."