Research into improving the electrification of SUVs and better batteries for high-performance cars are among the projects that will benefit.
Business and Energy Secretary Greg Clark said: "Low-carbon and driverless cars are the future and as a Government we are determined through the Industrial Strategy to build on our strengths and put the UK at the forefront of this revolution.
"Investment in this technology is an integral part of this Government's efforts to ensure the UK auto sector remains competitive and world-leading.
"The projects being awarded funding today will help extend our excellence in these cutting-edge research fields, helping to safeguard jobs while ensuring the UK remains the go-to destination for automotive excellence."
AA president Edmund King commented: "Technological advances on the road towards driverless cars should bring benefits in terms of enhancing the economy and the environment, as well as making cars safer and more sustainable."
The Government also confirmed that motorists will continue to benefit from grants of up to £4,500 if they buy an ultra-low emission car, up to £2,500 for a hybrid and £500 towards installing a charge point in their home.
Transport minister John Hayes said: "The number of ultra-low emission vehicles on our roads is at record levels and our renewed support for these exciting technologies is yet another significant milestone."
Members of the public were given the opportunity to test a driverless vehicle in the UK for the first time last week.
Around 100 people are expected to travel in a prototype shuttle on a two-mile route near London's O2 Arena before the end of the month.