New blow for Eco City as Mercedes terminates distributor deal

LONDON, Sept 23 (Reuters) - Eco City Vehicles said Mercedes (Xetra: 710000 - news) -Benz had terminated a financing and trading deal making the British firm the sole distributor of the Mercedes Vito model that is licensed for use as a London taxi, in the latest blow for the stricken company.

Its shares have been suspended since Friday when it said that its One80 subsidiary was facing potential administration, leading to "uncertainty as to the group's financial position and prospects".

Eco City said in a statement on Tuesday that its directors were evaluating options in the wake of the termination of the arrangements with Mercedes.

Production of the Mercedes Vito taxi model has been on hold since August due to a lack of sales, a development which has sent revenues at distributor Eco City plunging by a third in the six months to end-June.

Eco City in August blamed Uber, a U.S. taxi-hire company, as one of the reasons for the challenging conditions it faces, saying the company caused uncertainty in London's licensed taxi market.

San-Francisco based Uber, backed by heavyweight investors including Goldman Sachs (NYSE: GS-PB - news) and Google (Xetra: A0B7FY - news) , allows customers to book and pay for a taxi using an app on their smartphones.

Eco City's 76.6 percent-owned subsidiary One80 owns the licence for the rear-wheel steering system used in the Mercedes Vito taxi, making the vehicle fit for approval under strict rules governing London taxis.

Eco City has a market capitalisation of about 1.5 million pounds ($2.5 million).

($1 = 0.6109 British Pounds) (Reporting by Sarah Young; editing by Jane Baird)