An initial batch of 20 driver-operated ‘pods’, capable of carrying two people, will run on designated pathways in Milton Keynes city centre.
Within two years, the scheme envisages autonomous pods that use sensors to avoid obstacles and pedestrians.
Business Secretary Vince Cable made the announcement on a visit to Northampton and the University Technical College at Silverstone. He said: “Driverless cars are another invention that has the potential to generate the kind of high-skilled jobs we want Britain to be famous for, as well as cutting congestion and pollution and improving road safety.”
The project is one of a series of pilots being run by the Advanced Propulsion Centre to develop new techologies. Collaborators are engineering consultancy Arup, Transport Systems catapult, the Automotive Council and the universities of Oxford and Cambridge.
Programme director John Miles said: “With the continually increasing number of people living in cities, city authorities are facing some real challenges with regards to ensuring future levels of mobility.
“This project has the potential to deliver a truly autonomous low carbon transport option within the context of a city centre and we are delighted to be using this funding to take the project into the first stages of design.”
Mr Cable said: “By 2050, very few – if any – new cars will be powered solely by the traditional internal combustion engines, so it is important that the UK car industry is at the cutting edge of low carbon technologies.
“The car industry has gone from strength to strength – with one vehicle rolling off a production line somewhere in the UK every 20 seconds. But we must look at the long-term challenges and opportunities to ensure the sector continues to succeed and grow.”