Business secretary Sajid Javid, who is also an MP for Bromsgrove, visited the company last week to officially announce the programme.
The project will see Morgan develop new powertrain technologies in collaboration with fellow UK companies Delta Motorsport and Potenza Technology.
With the funding from the UK’s Advanced Propulsion Centre, the consortium will develop hybrid and electric powertrain systems significantly reducing vehicle CO2 emissions and delivering best-in-class fuel economy.
The technologies developed through the project will be introduced progressively on Morgan’s range of hand-built sports cars from 2019, with hybrid propulsion available on all of its models by the end of the decade.
Managing director, Steve Morris, said: “This is a very exciting project for us. We have been involved in the research and development of new propulsion technology since the inception of the LifeCar project almost ten years ago.
“We are now ready to develop the best hybrid and electric drive-train solutions for production implementation before the end of the decade.”
Morris hopes the advantages in terms of performance, fuel economy and refinement will increase demand across its most important markets in UK and across Europe.
This will in turn result in a growth of the workforce at the Malvern factory and within the partnering companies.
He added: “We expect the project to deliver growth and employment benefits here at Morgan and in our partner companies, but equally it will broaden the appeal of the Morgan brand and attract new customers in our key markets.”