ELECTRIC van maker Tanfield has moved a step closer to blocking any more unwanted overtures from a rival.

The Wearside-based business signed a $1m exclusivity deal with its US associate company, after turning down a bid from rival Liberty Electric Cars.

The arrangement gives Smith Electric Vehicles US Corp (Sevus), in which Tanfield owns a 49 per cent stake, a 60-day period to bring together the UK and US electric van divisions into one business.

Sources close to the proposed deal have confirmed the US business stepped up its bid to secure the design and engineering expertise of its UK counterpart after becoming alarmed by Liberty’s attempt to merge with loss-making Tanfield.

The agreement with Sevus has been under discussion since March and talks are at a relatively advanced stage between the two parties.

The $1m payment is nonrefundable, but it would be deducted from any payment made by Sevus if the consolidation is completed successfully.

Once the deal is finalised, the new company is expected to be listed on the Nasdaq and have its headquarters in the US, while retaining its European base in Washington, Wearside.

Sevus, based in Kansas City International Airport, was established last year as a partnership between Tanfield and US investors.

The US electric vehicle market is growing rapidly and Sevus has already won the backing of leading political figures in the US, including President Barack Obama, who visited the plant in July to highlight its importance to the country’s green economy.

Tanfield recently eased cashflow fears after it raised £1.8m from a share offer to its existing shareholders.

Last Friday, it rebuffed a takeover bid from Liberty, the Oxford-based business that is developing electric vehicles in Cramlington, Northumberland.

On Monday, Liberty appealed to Tanfield’s shareholders to help push through a merger of the two North- East businesses.

If Sevus is successful in completing its deal with Tanfield, then Liberty would be forced to look elsewhere in its bid to expand its manufacturing capability and technical know-how.

Liberty says it has entered into an agreement worth £500m with the Chinese government to provide the technology for a fleet of electric buses.