Lease companies will not put significant numbers of electric vehicles onto their fleets until uncertainty surrounding their development and long-term residual performance has been resolved.

The news will come as a blow to the government, which has identified electric cars as one of the best ways for the UK to meet its legally-binding target to cut CO2 emissions.

The lease industry believes that serious questions remain unanswered in relation to electric vehicles and, as such, they represent a risk that they are unwilling to take.

“The biggest stumbling block is in the area of residual values,” said John Lewis, director-general of the British Vehicle Rental and Leasing Association.

“What happens if a new battery technology emerges and makes all previous models of electric car almost worthless overnight?”

Without the adoption of electric vehicle technology by the lease industry, which supplies the country’s fleets, the government’s plan to radically reduce transport emissions looks in doubt.

Geoff Hoon, secretary of state for transport, said recently: “We want to see more electric and low emission cars in the UK, as we move towards a low carbon future.”

In its first report, the committee on climate change said removing reliance on the combustion engine in favour of electric and hybrid cars was one of the most effective ways to reduce fossil fuel consumption.

Committee chairman Lord Turner said such measures were necessary for Britain to meet its greenhouse gas emission targets.

Adding to the pressure for the industry to adopt electric vehicle technology, the Zero Emission Vehicle Foundation called on leasing and finance companies to make electric vehicles cheaper.

In an attempt to answer some of the questions, the BVRLA is working with Cenex – the UK’s centre of excellence for low carbon and fuel cell technologies.

“Until we can answer them, leasing companies will not feel comfortable about taking the risk of owning and operating large electric fleets,” said Mr Lewis.

Sales of electric vehicles have fallen 58% this year, with just 156 sold from January to October 2008, compared to 374 for the same period in 2007.

It is estimated that there are only around 1,100 all-electric cars currently on UK roads and one of London’s two electric car distributors, the Nice Car Company, has gone into administration.

The government is considering the climate change committee’s report, which contains recommendations on the 2050 emissions reduction target and advises on the levels of the UK’s first three legally binding carbon budgets for 2008-2022.