Jaguar, the luxury car group owned by Ford of the US, yesterday said there was a strong possibility that it would build a new "small" saloon in the UK, in an investment programme that could exceed pounds 500m.
Nick Scheele, Jaguar's chairman, confirmed that initial feasibility studies for a third Jaguar model range had proved positive and a more in-depth study into the business case for the car, code-named X400, would be completed in three months.
Jaguar believes it could sell 100,000 of the cars, doubling its current production plans, which would compete with the successful BMW 3-series. It would also provide thousands more jobs, on top of the company's 6,300 strong workforce.
While Mr Scheele put the chances of pressing ahead with the X400 at "no more than 50-50", he said he hoped it could be built in Britain.
"I'd like to think we can find somewhere in the UK that's economically possible. We're looking at our two sites in the West Midlands by doing something innovative there, because we just don't have the capacity there. We could then move on to look at alternatives, including a location elsewhere in the UK."
The biggest barrier to producing the car at Jaguar's existing plants was capacity at its Castle Bromwich paint facility, which was already being expanded for the arrival of the new medium-sized saloon range in 1999. The $600m investment project to build the car, the X200, was confirmed last year after the Government offered a pounds 80m state aid package.
Jaguar hoped to assemble the new small car in its Brown's Lane production plant, but said it may need a 100-acre greenfield site, adding substantially to the cost. Mr Scheele continued: "There's just no way we can find a site like that nearby."
Coventry Council, which had already been in discussions with Jaguar about the project, said it believed it could come up with a location. Chris Beck, from the authority's development directorate, said: "We would try to meet their needs by offering a range of sites in Coventry or the surrounding area."
Mr Scheele insisted the UK's chances of building the car did not depend on the level of government aid. "It's true to say most investments which create that number of jobs are liable to state aid."