Motorists and businesses are to be offered grants of up to £5,000 when they buy electric cars or plug-in hybrids, under wide-reaching plans unveiled today by the government that will also result in the rollout of electric car charging networks and electric car demonstration cities.

The £250m strategy is to be unveiled today by transport secretary Geoff Hoon and business secretary Lord Mandelson and is expected to centre on grants of between £2,000 and £5,000 being offered to consumers buying low-carbon vehicles in an attempt to eradicate the price premium on vehicles such as electric cars and plug-in hybrids.

The proposals were immediately welcomed by electric car providers which said that the scale of the incentives should prove sufficient to help change purchasing habits.

Speaking to the Guardian ahead of the launch of the proposals, Hoon said that an increase in electric car ownership would play a major role in the UK's efforts to meet its emission reduction targets.

He added that the government's proposals, which will also see 200 demonstration vehicles made available to motorists considering buying electric cars, would seek to normalise ownership of low-carbon vehicles.

"We have to get people used to the idea that electric cars will become quite normal, quite usual," said Hoon. "That it won't be exceptional and, without being unkind to existing electric vehicles, they won't be slightly odd; they will be cars that conform to appropriate safety standards and that we can use on an everyday basis."

In addition to grants for motorists, £20m will be made available to help a number of cities roll out charging networks, while £100m will be provided to manufacturers to help them fund R&D and build up production capacity.

Hoon also hinted that further incentives could follow, adding that the government was exploring the possibility of setting up battery lease schemes that would help reduce the ongoing maintenance costs of electric vehicles.

Currently, electric cars make up a tiny fraction of the UK fleet and there are only a small number of models, such as the iconic G-Wiz, available.

However, many new models are expected to be launched over the next two years, with high-profile electric car manufacturers such as Tesla and Norway's Think poised to begin shipping cars to the UK later this year and Toyota preparing a plug-in version of its Prius hybrid.

The proposals were welcomed by Steve Hartridge, managing director of GoinGreen, the UK supplier of the G-Wiz, who argued that they could have a major impact on motorists' purchasing habits. "The G-Wiz is priced at £8,000, even if it only qualifies for the £2,000 grant that is 25 per cent off the price," he said. "That is certainly enough to help change purchasing behaviour."

However, he questioned the decision to delay the scheme until 2011, noting that electric car suppliers were operating now. He also warned that the £20m in funding for charging networks would need to be followed by far higher sums from the private sector if the UK is to build an effective charging network.