Organisers hoped the creation would allow Morgan enthusiasts and visitors to be photographed sitting alongside the Morgan founder and his son – becoming part of the statue themselves.
They also hoped it would create a focal point in the centre of Malvern and a major attraction for visitors.
But the Observer understands the charity received around £140,000 – approximately half the figure required in donations.
In a statement, Morgan Statue Foundation chairman Roger Moran said: “After much voluntary hard work over more than eleven years by the Trustees, the Foundation was unfortunately unable to raise the funds necessary for the statue.
“Consequently, the Trustees reluctantly decided to halt fund-raising and dissolve the Foundation.
“The Trustees sincerely thank everyone who assisted the Foundation, physically or financially, to try and make the statue become a reality.”
Harriett Baldwin MP for West Worcestershire said Morgan’s legacy in Malvern will still play a vital role moving forward:
“Attempts to formally recognise Morgan cars with a local statue have been going on for many years and I understand it has been a struggle to raise funds for the venture,” she said.
“Nevertheless, you see people driving the iconic cars around Malvern almost every day, and Morgans are sold all over the world, so I am confident the car and the family are not at risk of slipping out of our minds.”
The statue did receive planning permission from Malvern Hills District Council and bosses from the authority have also expressed their disappointment.
Simon Smith, economic development manager for the district council, said: “We’re sorry to hear that this campaign has run into difficulties. We felt this was a really good project to commemorate the founder of the Morgan Motor Company, and it would have been a great addition to the town.
“We are always happy to discuss any other plans or ideas they may have in the future.”
A spokesman from the Morgan Motor Company said the firm did not wish to comment.
The Morgan Statue Foundation, whose patrons include Formula One racing legend Sir Stirling Moss, has repaid all identifiable contributors who donated and decided to donate a proportion of the net remaining funds to the Malvern Museum.