Ford will begin testing of a battery-powered Ford Focus fleet in the UK from early 2010.
The cars are being developed using funding from the government's Technology Strategy Board, which promotes industry-led projects that reduce carbon dioxide.
In total, the government has today announced £25 million has been awarded to eight companies, including Ford, with the goal of getting around 340 electric demonstrator vehicles on UK roads in the next six to 18 months.
The electric Ford Focus fleet is being set up by Ford of Europe and will be adapted to use technology that has already been evaluated in Ford's Tourneo Connect BEV (Battery Electric Vehicle) concept.
The full BEV powertrain showcased in the Tourneo Connect Concept was developed in collaboration with Smith Electric Vehicles, which is a specialist converter of commercial vehicles for electric useage.
Smith Electric Vehicles is part of a separate consortium that also has secured government funding to further develop the Tourneo Connect BEV Concept. In the US, Ford has already announced it will sell an electric Transit Commercial vehicle from 2010.
The Tourneo Connect BEV Concept uses a 21kWh lithium ion phosphate battery pack to accumulate energy to drive a 50kW permanent magnet motor, while the drive torque is transmitted to the driveshafts by a single-speed transmission.
This set-up targets a range of up to 100 miles and a top speed of 80mph. The Tourneo can be plugged directly into a standard mains socket, and a full battery charge takes six to eight hours.
The Ford Focus BEVs are being developed at Ford's UK research and development centre at Dunton in Essex, which currently develops powertrains for all Ford vehicles in Europe.
They will be real-world tested in Hillingdon, Middlesex by drivers from Scottish and Southern Energy, which is a partner in the project.
Joe Greenwell, Ford of Britain chairman, said: "Battery electric vehicles represent an important step in Ford's pursuit of delivering more efficient and sustainable mobility solutions. Ford is looking forward to working with its project partners on developing a viable market for electric vehicles both in the UK and Europe.
"The development of this fleet is an ideal way to evaluate the potential for this technology in the UK and broader European markets. By gaining real world experience with a number of prototypes we can look at the practical and business potential for us to develop battery-electric cars for the European market."