The Engineering and Physical Sciences Research Council (EPSRC) is providing £10 million for low carbon vehicle projects.
Three major projects developed by EPSRC with the Technology Strategy Board will cover scientific and engineering issues in design and production of the vehicles.
Business minister Mark Prisk announced the funding at the opening of a new exhibition at the Department for Business, Innovation and Skills (BIS) to showcase UK manufactured low carbon vehicles.
"The coalition government is absolutely committed to low carbon growth, tackling climate change and making our energy supply more secure,” he said.
"This exhibition highlights UK success as advanced manufacturers of low carbon vehicles and the £10m research grant will help ensure that the UK remains a world leader."
The projects will be based at Loughborough, Brunel and Warwick Universities and will cover the design of hybrid electric vehicles subsystems, the use of recycled and recyclable materials for in manufacturing vehicles, and performance optimisation of electric motors and power electronics.
Professor Dave Delpy, chief executive of EPSRC said: "The provision of high quality academic research ideas provides the basis for businesses to translate science into the vehicle market."
Universities and Science Minister David Willetts said: "Our world class science and research base is critical to promoting economic growth in emerging technologies, including low carbon vehicles.
"This will improve people's quality of life by pushing at the frontiers of our knowledge."
The Low Carbon vehicle exhibition is the sixth in a rolling series held at BIS to promote UK manufacturing excellence to businesses, and will run until March 25.