Automaker Jaguar Land Rover has announced it will build a new £355m engine plant in Wolverhampton.
The luxury car maker, part of Indian group Tata Motors, will create around 750 jobs and the government will also provide up to £10m for the new plant.
"JLR choosing Wolverhampton for its new engine plant in the face of tough international competition is a tremendous boost for manufacturing in the UK and the West Midlands in particular," said business secretary Vince Cable.
Lib Dem MP Cable marked the announcement by visiting a JLR production plant in nearby Solihull, as the Lib Dems hold their annual conference in Birmingham.
Jaguar Land Rover (JLR) already employs more than 19,000 people in Britain and supports up to 140,000 jobs.
It has been boosted by strong demand from emerging markets such as Russia and China for its cars.
"As we invest 1.5 billion pounds a year for the next five years on new product developments, expanding our engine range will help us realise the full global potential of the Jaguar and Land Rover brands," said Ralf Speth, JLR CEO.
Britain is seeking to support manufacturing as part of efforts to rebalance an economy that had been over-reliant on financial services.
Britain's car industry is now largely foreign-owned but employs around 800,000 people and accounts for about 10 per cent of the country's exports.
Speth said last week at the Frankfurt auto show that JLR expected to decide on a local partner for production in China by the end of this year.