Businesses, engineers and academic experts are being offered a £10 million prize to develop ultra-low emission cars that can compete with oil or gas powered vehicles.

The cash will be given for technological improvements which enable ultra-low emissions vehicles to run as long and as far as conventionally fuelled cars, without having to burn fossil fuels.

The incentive is expected to encourage commercial and investment opportunities in Britain’s car industry. It will only be targeted at technology for everyday cars that are comparable in price to conventionally fuelled cars in order to ensure the next-generation of low emission vehicles are affordable for all.

The news follows a £1 billion investment for a research centre earlier this month which will support the development of new supply chains for low carbon vehicles.

The development of ultra-low emission vehicles are vital to reduce the impact of climate change and preserve the environment for the future.

Danny Alexander, Chief Secretary to the Treasury said: “We want more companies to invest in this cutting-edge research so that Britain is the global leader in ultra-low emission vehicle.”

The competition will start by the end of the year.