Lord Drayson test drives the T.25, a petrol version of the new T.27 all-electric urban car

A £9 million project to develop a new, all-electric affordable urban car has been announced.

Called the T.27, the car is the brainchild of Surrey-based company Gordon Murray Design and Derbyshire-based Zytek Automotive Technology.

Meanwhile, a car-cum-scooter "green" concept vehicle has been unveiled in London by car giant Peugeot. Known as the BB1, the electric vehicle can seat up to four adults in a space of just 8.2ft (2.5m).

The Zytek project has been made possible through a £4.5 million investment from the Government-backed Technology Strategy Board.

The two companies will develop four prototypes of the vehicle by February 2011.

Science and Innovation Minister Lord Drayson said: "The T.27 is a great example of smart engineering and sustainable design. It's timely too, as the UK must demonstrate its readiness to exploit the emerging low-carbon vehicles market.

"The challenge is far greater than simply meeting stricter EU emissions targets. We need to expand our car industry through green innovation."

The T.27 is a sustainable vehicle, which means that it will be designed in a way that minimises the use of materials and keeps the embedded carbon of the vehicle as low as possible. The aim is to ensure that the environmental impact of the materials and energy that are used are as low as can be.

Giving off zero emissions and aimed at urban motorists, the Peugeot BB1 is easy to park and has a range of 75 miles (120km). It is fitted with two electric motors mounted in the rear wheels and has two lithium-ion battery packs which supply energy to the motors. The passenger compartment ventilation keeps operating in daylight thanks to solar panels on the roof of the vehicle.

Peugeot's UK managing director Jon Goodman said: "The BB1 concept pushes back the boundaries, creating an inventive, fun, expressive and stylish vehicle... It aims to explore new ground with regards to urban mobility, with the environment close at heart."