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With government incentives, prices for electric vehicles are starting to near levels for comparable vehicles with traditional internal combustion engines.MICHELLE SIU/The Globe and Mail

A price war has broken out in the electric vehicle market.

Nissan Canada Inc. said Tuesday it will offer a lower-priced version of its Leaf when the 2013 model goes on sale next month. General Motors of Canada Ltd. is offering seven-year, interest-free loans on the Chevrolet Volt for the next 10 days.

And Mitsubishi Motor Sales of Canada Inc. is offering incentives of $5,000 and $8,000 on the two versions of its i-MiEV electric car.

The price war comes as new competitors enter what at the moment is a tiny segment of the Canadian market, but one that is expected to grow as auto makers diversify their engine offerings to meet stringent new standards for emissions and fuel economy that will start coming into force in 2017.

Nissan Canada, whose parent Nissan Motor Co. Ltd. has made a multibillion-dollar bet that electric vehicles will be the main alternative to internal combustion-powered cars and trucks, will offer a new, S version of its five-passenger Leaf for $31,698.

The SV version, which was the lowest-priced model in 2012 at $38,395, will cost $34,998, a drop of 9 per cent.

The 2013 price includes a quick charger, which was an optional extra on the 2012 SV model. Sales of Leaf models doubled in the first five months of 2013, to 235 from 117 in the same period a year earlier.

Sales of the $42,000 Chevrolet Volt, which is not a pure electric vehicle, slumped 25 per cent in the first five months of the year – to 318 from 421 a year earlier – and plunged 63 per cent in May in Canada. In the U.S. market, General Motors Co. is offering a $4,000 (U.S.) cash incentive on the Volt to clear out huge inventory.

There are government incentives in both countries, including about $8,200 (Canadian) for Ontario residents who buy electric or plug-in hybrid vehicles. The Quebec government offers $7,865 and B.C. residents can apply for a $5,000 government credit. With such incentives, prices for electric vehicles are starting to near levels for comparable vehicles with traditional internal combustion engines.

For the moment, though, price is one of the issues holding back sales, especially when buyers compare electric vehicles with the hybrid Toyota Prius, said industry analyst Warren Browne, vice-president of business development at consulting firm AutomotiveCompass LLC.

"Prius has captured the mind space of consumers who think hybrid and electric, especially in California," Mr. Browne said. "Current producers are doing the right thing by cutting price to generate a critical mass and diluting the mind space that Prius occupies. They have just waited too long."

Another issue affecting electric vehicle sales is infrastructure and a perceived lack of charging stations.

The lack of charging stations in the United States has held back sales, Coda Automotive Inc., an electric vehicle manufacturer that filed for Chapter 11 bankruptcy protection in Delaware on May 1, said in a court filing.

But John Arnone, a spokesman for Mitsubishi Canada, said the number of stations in Canada is growing as hotels, condominium buildings and shopping malls discover they need to offer outlets for plug-in vehicles.