Toyota has signed an £11.3m deal to help it develop a new range of hydrogen-powered pickup trucks.
The agreement could create up to 250 jobs across the UK, according to the government.
The funding will allow Toyota to set up a pilot production line for its Hilux FC model at its plant near Derby.
Research carried out there could eventually pave the way for trucks to be built at the company's Deeside factory in Wales.
The Department for Business, Energy and Industrial Strategy is investing £5.6m in the research scheme, based at Burnaston, with a further £5.7m coming through the Advance Propulsion Centre UK (APC) - an industry body which supports work to decarbonise transport.
Hydrogen-powered vehicles do not use electricity stored in a battery but generate it, with zero emissions, through a chemical reaction between hydrogen and oxygen.
The government said that hydrogen vehicles were better suited to isolated settings like farms and quarries, where pickup trucks are already commonly used, and the infrastructure for electric vehicle charging is impractical.
Business Secretary Grant Shapps said: "Seizing the potential from new technologies will be a key part of its future success, while also making our roads cleaner, greener and more affordable.
"This multi-million-pound boost - created by government working hand-in-hand with industry - will put firms in pole position to pioneer these innovations, staying at the cutting edge of the global race for decades to come."
Managing director at Toyota Manufacturing UK Richard Kenworthy said: "This exciting project allows Toyota the opportunity to develop a unique fuel cell commercial vehicle on the iconic Hilux platform, in the UK.
"This will significantly contribute to the skill base not only within Toyota in the UK but also through the consortium partners and wider supply chain."
APC chief executive Ian Constance said: "Supporting vital research and development in the UK, now more than ever, provides an opportunity to invest in transport decarbonisation as well as boost growth in the automotive sector."
The Toyota deal is one of five announced on Friday which have a total of £73m of backing from the APC.
Other schemes will the development of a new method for manufacturing permanent magnet electric motors in Bridgwater in Somerset, and a hydrogen fuel cell-powered HGV cab and tractor unit in Glasgow.
A project to provide lower carbon and lower cost sources of recycled aluminium alloys for the car industry is also being developed in Slough and there is funding to develop methane powered, off-road heavy tractors in Basildon, Essex.