The three-wheeled, one-metre wide vehicle runs on natural gas and consumes 2.5 litres of fuel per 100 kilometres (94 miles per gallon).
Known as the Clever - Compact Low Emission Vehicle for Urban Transport - the streamlined car is easy to park and can transport a driver and one passenger, seated in the back.
Researchers from Bath University, western England, have been testing a prototype of the car, which is the product of a jointly-run project by engineers from Britain, France, Germany and Austria in collaboration with BMW.
The Bath team have developed a unique tilting suspension on the vehicle. The car's chassis tilts automatically, like a motorbike, as it turns corners, helping it to remain stable.
Dr Geraint Owen, senior lecturer in mechanical engineering at Bath University said: "It's the first vehicle that has used hydraulics to enable it to move like a motorcycle, but to drive like a car."
The project was financed with A$3.6 million (1.5 million pounds, 2.16 million euros) from the European Union.
Five of the cars have been produced so far, but Dr Owen said Brussels was considering trials in other cities.
The estimated cost of production, if mass-produced, is between A$12,000 and A$24,000.
With a maximum speed of about 100 kilometers (60 miles) an hour, the car goes from 0-to-64 kilometers an hour in seven seconds.