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“The only non-subsidy way to meet the target is we have a bunch of cheap Chinese EVs dumped on our shores,” said another Labour source.
The party has also been studying how other countries are encouraging the switch to electric vehicles. Joe Biden’s Inflation Reduction Act provides a tax credit of up to $7,500 for EVs made in the US.
Officials have also looked at French incentives of up to €7,000 that were recently changed to exclude many EVs made in China.
There are also concerns that state subsidies could fall foul of international trade rules.
President Biden faced a backlash from countries including South Korea and Japan after their car exports were excluded from the generous consumer tax credits.
The UK exports 80pc of the cars it makes, mainly to Europe.
It is understood that Labour has sought legal advice to ensure that subsidies do not fall foul of World Trade Organisation rules.
Last month, Rishi Sunak announced Britain will push back a ban on new petrol and diesel cars and vans to 2035 from 2030,to protect “hard-pressed British families” from “unacceptable costs”.
Labour is understood to be waiting for any more green announcements from Jeremy Hunt in the Autumn Statement and is also watching for progress between the UK and EU on post-Brexit tariff arrangements on electric vehicles that threaten to raise prices by £3,400 next year.
“Ultimately we want to make sure that going electric is the easy and cheap choice whether you’re looking to buy a new or second-hand car ahead of the 2030 switchover,” said one figure familiar with Labour’s plans.
A Labour spokesman did not respond to a request for comment.
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