The Government’s Budget announcement regarding incentives for ultra-low CO2 cars has sent a clear message to manufacturers to continue investing in bringing down emissions levels.

Chancellor Alistair Darling announced that for five years from 1 April 2010 drivers of cars emitting between 1-75g/km will be handed a halved benefit-in-kind tax banding. Although there are currently no models on sale that slot into that area – the Smart Fortwo on 86g/km and Toyota‘s hybrid Prius at 89g/km are the lowest at the moment – things will get interesting within two years. General Motors is planning to launch both the 40g/km Vauxhall Ampera and its Chevrolet Volt sister car, and Toyota is readying a 59g/km plug-in hybrid Prius. All three models use a petrol engine to recharge the battery, and can also be recharged at a house or business from a three-pin socket.

“The Government has clearly drawn a line in the sand and very clearly confirmed it will use tax to influence buying decisions,” said Business Car Finance director David Rawlings. “It is putting out the message to manufacturers not to back off – keep the pressure on and we will stimulate demand from company car drivers.”

Rawling’s only worry is whether the cars that will be eligible for the BIK reduction will be of “mass market” status. “To get to that level, what will the cars be like and what will they cost?” he said.

The chancellor’s announcement will help mitigate the predictable extra cost of these ultra-low CO2 models, and negate any penalties they may have faced on their monthly BIK bills as a result of the high-tech car’s higher P11D.

Leasing and fuel car firm Arval said the BIK reduction “is a clear incentive for business drivers to make a sustainable vehicle choice”, according to corporate services director Mark Biggs. But he added: “Fleet managers must fully assess the practicalities of using such vehicles, and the constraints of limited choice, before introducing them.”

The car manufacturers responded positively. “This is something we’d been advocating,” said GM’s Government relations manager Danielle Chapman. “We would have liked the car to be seen as zero emission, but other countries have yet to get to this level.” However, a spokesman from GM subsidiary Chevrolet confirmed it had been pushing for a BIK exemption because the Volt has a similar electric power-only range to the electric vehicles coming to market.

A Toyota spokesman described the BIK reduction as a “welcome, positive step in the right direction recognising the environmental performance and contribution that plug-in hybrid technology will make to low emissions”.

Some industry commentators were though less convinced. ACFO chairman Julie Jenner branded it a “headline-grabbing move” as any eligible models are at least a year away.

Before the Budget, industry associations ACFO, the BVRLA and the SMMT had all called for plug-in hybrids to join pure-electric cars in being handed a BIK exemption for the next five years.