Recharge plea from Scots eco-van maker  20 | 09 | 2010

    ONE OF SCOTLAND'S leading builder of eco-friendly vehicle has seen pre-tax profits slashed dramatically as orders have slowed down. Now Paul Nelson, managing director of Allied Vehicles in Glasgow, is calling for the Scottish Government to overhaul the research grant system.

    Nelson believes that unless significant new steps are taken, firms such as his at the cutting edge of green technology face the threat of disappearing as they struggle to make money from investment in low-carbon alternatives.

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

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

    The company's main problem is due to the poor economies of scale, a direct result of the sporadic placing of orders, and the fact a typical Allied Electric vehicle costs £20,000-£30,000 more than its traditional diesel equivalent.

    "Of course the price difference 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. Without volume there isn't the possibility of securing purchasing discounts through bulk buying. It is a circle that I can't square on my own. "

    Allied's financing costs have doubled during the past year, and are likely to do the same again in the coming 12 months, making it not feasible to borrow from banks to bulk purchase.

    Allied, which employs 320 people and also builds wheelchair accessible transport, has previously received Regional Selective Assistance to create jobs in its traditional operations. These had been dominated by the production of taxis but, as the recession continued to hit demand from taxi companies has dropped.

    That has been a contributing factor in Allied's latest accounts for the 12 months to April 2009 which shows turnover dropped from £69.1m in the previous 15-month period to £60.4 million against; pre-tax profits were slashed from £742,975 to £110,681.

    Last year sales continued to stall and as a result the company was forced to introduce short-time working, production halts and, eventually, about 40 lay-offs. However, Allied is projecting a slight increase in sales and profits for the current year.

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