Ian Hobday, managing director of UK-based Liberty Electric Cars, has told BusinessGreen the company is now actively investigating the the possibility of buying Modec, the Coventry-based electric van maker which was placed in administartion on 4 March, arguing such a move would be preferable to the company being acquired by an overseas firm, as happened late last year to Wearside-based Tanfield Group's Smith Electric Vehicles, which converts Ford vans to electric drivetrains.

According to the report, he also urged the government to extend its GBP5,000 plugged-in-car grant to commercial vehicles and said London Mayor Boris Johnson should introduce a policy, already in place in some European cities, whereby freight deliveries are restricted to the night time, forcing companies to use quiet EVs to avoid noise disturbance.

A Department for Transport spokeswoman told BusinessGreen it is currently working with the freight industry and manufacturers to identify ways of boosting uptake of lower emission commercial vehicles across the freight and logistics sector.

The news of Modec's failure is likely to cause embarrassment to the government, as it coincides with the publication of a high-profile cross department Carbon Plan that includes a commitment to accelerate the roll out of electric vehicle recharging infrastructure, the report noted.

The Financial Times said Modec went into administration with debts of over GBP40m.

The main creditor is Federated Investments, the vehicle of Lord Borwick, who founded Modec in 2004. He invested GBP14m profit on the sale of the 38% stake held by his family for more than 40 years in Manganese Bronze, maker of the London taxi, the paper said.

Lord Borwick, a former chairman of Manganese Bronze, set up an assembly plant in Coventry to build the Modec, which is comparable in size to a Ford Transit or Mercedes Sprinter. Supermarket chain Tesco took 15 of the first vans to be built in 2007 but has not placed an order since, the FT said.

The plan was to increase production to 2,000 vans a year, but so far just 400 have been sold, including 150 in the UK, to customers such as UPS and FedEx, it added.

The report and accounts for 2009 showed turnover of GBP9.3m, a pre-tax loss of GBP6m and net liabilities of GBP29m. Grant Thornton, the auditors, said the figures indicated “a material uncertainty which may cast doubt about the company’s ability to continue as a going concern”, the FT said.

Three partners from Zolfo Cooper, a corporate advisory and restructuring business, were appointed as administrators last Friday, and immediately made 26 of the 53 employees redundant. They described Modec as “a market leader in its field, and as such it represents an attractive purchase for the right buyer”, the paper added.

Lord Borwick told the Financial Times the company had been hit by the recession, which had left potential customers reluctant to invest in something new. In spite of low interest rates, companies had been unwilling to incur the high capital cost of GBP55,000 per van. Enthusiasm for green transport was at a lower level than three years ago, even though diesel was becoming expensive.

Nevertheless he believed that electric vehicles with low running costs were “the vehicles of the future. But we are unfortunately operating in the present”.

The papwer noted that the difficult economic climate had claimed other victims among companies focused on green transport. In April 2009, Axeon, which supplied Modec with battery packs, was taken private after going into administration. At the beginning of this year, Tanfield, a powered access specialist, completed the sale of the assets of Smith Electric Vehicles UK to its US associate. The group had set out to become a global leader in zero emission electric trucks through its ownership of Smith Electric, renowned for producing milk delivery 'floats' in the 1950s.