Electric vehicle maker needs a funds recharge

A COMPANY boss building eco-friendly vehicles has called on the government to overhaul the research grant system or risk losing firms at the leading edge of the next wave of green technologies.

Paul Nelson, managing director of Allied Vehicles in Glasgow, says the changes are necessary because firms such as his are struggling to make money from investment in low-carbon alternatives.

He wants to see a broadening of the type of projects qualifying for assistance through the Scottish Research, Development and Innovation Scheme (SRDI), the Scottish Government's umbrella for a raft of business grant programmes.

"R&D in my opinion extends to commercialisation," he said. "They (SRDI] don't do that. They draw the line at pure research."

Nelson said orders for environmentally-friendly products such as his firm's electric vans are currently too few to bring down the cost of production.

A Scottish Government spokesman said the administration was committed to the creation of a low-carbon economy as a key component in Scotland's future success, and highlighted the range of assistance already available.

"We want to build as supportive a business environment as possible," he said. "Grant support from Scottish Enterprise and Highlands and Islands Enterprise is available for innovative companies."

Allied Electric specialises in the conversion of vans and people carriers used for delivery and transport. The division launched in 2008 and is expected to turn out about 200 vehicles in the current financial year.

Orders, however, tend to be sporadic. Nelson said this had led to delays in securing parts, as Allied's suppliers won't normally keep such low levels of stock back in reserve.

It also wipes out the possibility of securing purchasing discounts through bulk buying. This is significant, as a typical Allied Electric vehicle costs 20,000-30,000, more than its traditional diesel equivalent.

"That is an issue for customers, but there is a problem for us as well, which is supply," Nelson said. "Because we are producing in such small volumes, we are ordering threes of things, and fives of things, and it can take months to get that in.

"I believe we can make it financially attractive, but we need volume. It is a circle that I can't square on my own."

Nelson said bank borrowing to finance bulk purchases isn't feasible, as Allied's financing costs have doubled during the past year, and are likely to do the same again in the coming 12 months.

Allied employs 320 people making not just electric vehicles, but also wheelchair accessible transport. It has in years past received Regional Selective Assistance to create jobs in its traditional operations, which until last year were dominated by the production of taxis.

That has since slipped, however, as taxi firms have been hard-hit by the recession.

Allied's latest accounts for the year to April 2009 reflect the impact of this, as turn-over dropped to 60.4 million against 69.1m in the previous 15-month period.

Meanwhile, pre-tax profits were slashed to 110,681 from 742,975.

Nelson said sales continued to deteriorate through the remainder of last year, forcing Allied into short time working, production halts and, eventually, about 40 lay-offs. Allied is projecting a slight increase in sales and profits for the current year.

Nelson said the problems faced by Allied are not uncommon and without some change in the form of available assistance, smaller firms currently leading the way in new green technologies could lose their edge to foreign competitors with deeper pockets.