James Dyson, the billionaire inventor of the bagless vacuum cleaner and bladeless fan, is building an electric car that will launch by 2020, the latest firm to challenge traditional carmakers in a burgeoning market.

Tesla has already shaken up the sector around the world and Dyson said it would now spend $3.4 billion on solid-state battery technology and vehicle design.

The announcement could stoke debate in Australia over the subsidisation and slow adoption of electric cars. Australian drivers lag behind developed markets in their transition to green vehicles.

On a rare visit to Australia in June, Renault Nissan Alliance chairman Carlos Ghson told Fairfax Media that electric cars will not be a success in Australia until governments are willing to subsidise their use.

Sales figures produced by the Federal Chamber of Automotive Industries show that just 200 electric cars have been delivered to Australian customers in 2017, less than 0.05 per cent of the 465,000 vehicles sold in the first five months of the year. 

Dyson said his company had been developing new battery and electric motor technology for its vacuum cleaners and other products for the past 20 years.

"Battery technology is very important to Dyson, electric motors are very important to Dyson, environmental control is very important to us," Dyson, aged 71, said at his company's flagship shop on London's Oxford Street on Tuesday, local time.

"I have been developing these technologies consistently because I could see that one day we could do a car."

Dyson told staff in an email that the company finally had the opportunity to bring all its technologies together into a single product. He is best known for inventing new technology for hair dryers, vacuum cleaners, hand dryers and other household items.

"Competition for new technology in the automotive industry is fierce and we must do everything we can to keep the specifics of our vehicle confidential," he added.

Dyson said a 400-strong team of engineers had already spent 2½ years working on the secret project in Wiltshire, in south-west England, developing the batteries that will power the in-house designed electric motor for the car.

The firm has yet to decide on where the vehicle would be manufactured, although it has ruled out working with any existing auto companies, Dyson said.

Last year, the UK government said in a report it was helping to fund a new battery electric vehicle at the firm, which will secure $297 million of investment in the area and create over 500 jobs.

The entry was quickly changed and Dyson declined to comment at the time in a sign of the secrecy shrouding the project.

Several countries offer direct or indirect subsidies for electric car use. Dubai recently introduced free parking and no tolls for electric car drivers.

In Australia, BMW Australia boss Marc Werner has previously labelled the federal government "crazy" for not introducing "legislation that will assist with the purchase of these vehicles".

An independent review of Australia's energy security released in June also found that local laws are holding back the development of electric cars in Australia.