Professor Gordon Murray, the man behind the McLaren Formula 1 car, has turned his talent to producing an ultra-compact urban car which promises to revolutionise personal transport.

The makers claim the T25 will reduce carbon emissions from transport, as much because of its low-emission production techniques as its low running costs.

Unusually, the car will be designed and built from start to finish in one location. Modern automotive manufacture is highly distributed, with the Mark holder often doing little more than final assembly.

"The T25 is designed to protect our mobility, personal freedom and driving 'fun' while greatly reducing the environmental damage from vehicle manufacturing and running," said Murray. "The T25 architecture, packaging and manufacturing process promises to be the biggest revolution in the mass production of cars in the past 100 years."

Gordon Murray Designs has already completed half of its two-year T25 programme, including finalising the production process and prototyping workshop. Its workshop will integrate traditional skills and processes with fully mechanised machining facilities.

Component design is almost complete, with the first prototype scheduled to be built in early 2009. First sales are expected to be in Europe and Asia.

"The manufacturing process is a complete re-think of the way we build cars and it will revolutionise automobile production," said Jonathan Feiber, board member and general partner at Silicon Valley venture capital firm MDV-Mohr Davidow Ventures, which has invested in the T25 programme.

"The most exciting aspect of this milestone in the programme is that real-world costs for the new manufacturing process have shown that all the company's ambitious targets for a massive reduction in manufacturing, running and lifecycle CO2 damage reductions will be met or improved," added Feiber.

The vehicle manufacturing process will lead to a significant reduction in CO2 emissions over the lifecycle of the car, claims Gordon Murray Designs.

Component parts will be minimised through multifunctional component design and tooling requirements to keep the environmental impact of making the T25 minimal. It will use recycled materials and its diminutive size will reduce the size of the plant required for final assembly.

The chassis is designed to flat pack for transportation to a 12th of the size of conventional vehicles.

The T25 manufacturing technologies will support up to six different body styles and internal layouts specifically adapted for customers.

The vehicle itself will support a variety of power trains and fuels and be best in class with CO2 emissions and fuel consumption less than half of the UK average, the company says. Despite its size, the T25 will still achieve the highest safety standards (at least Four-Star Euro NCAP), the company claims. It will have a better power-to-weight ratio than the average luxury sedan, feature a tiny turning circle and will be small enough so that three T25s can park in a standard space.

The price will be towards the lower end of the UK market, the company said in a statement.