The project -- Proving Factory -- has been launched by Rt Hon Vince Cable MP, UK's Secretary of State for Business, Innovation & Skills.
On completion, it will take low-carbon vehicle technologies designed by small high-tech British companies and university research departments, the company said.
The project is a collaboration led by Productiv (assembly) and Tata Steel (materials and component manufacture) with core partners MIRA (design verification) and the High Value Manufacturing Catapult (design for manufacture and assembly).
Supporting partners include Jaguar Land Rover, Schaeffler, Unipart and the Midlands Assembly Network.
The Proving Factory will manufacture low volume advanced technologies for vehicle manufacturers, with a target of 1,000 to 20,000 units per product per annum across 10 to 20 products, the company said.
Announcing the launch of the Factory last evening, Henrik Adam, Chief Commercial Officer for Tata Steel, said: "This initiative will bring together some of the most remarkable future automotive technologies, taking them from workbench prototypes to viable components and bridging the gap between great innovation and great commercial products".
The Proving Factory will consist of two facilities: component manufacturing at the Tata Steel site at Brinsworth, Rotherham and an assembly facility in the West Midlands, providing employment and regeneration, the company said.
"This project will not only benefit the small companies which have developed these technologies, but allow Tata Steel to provide its expertise in speciality steels and manufacturing, as well as access to vital supply chains.
Funded under the government's Advanced Manufacturing Supply Chain Initiative, the Proving Factory's production and assembly facilities will industrialise innovation and supply -- both components and systems -- into the automotive supply chain, supporting and reviving the UK manufacturing base, the company said.
Valuable work is being carried out by universities and small companies in developing innovative new technologies, particularly related to low carbon vehicles, Tata Steel said.
There is a need for these to be scaled up to meet low volume demands by vehicle manufacturers before they are adopted into mainstream vehicle platforms, it added.
The six technology developers involved include Flybrid, Drive System Design, Libralato and Bladon Jets.