Nissan has announced plans to build a new model at its Sunderland plant, creating 2,000 jobs.
Japanese car giant Nissan will build the vehicle under a £125 million investment programme from mid-2013 in a project supported by a £9.3 million grant from the government.
The Invitation model will compete with models in the so-called B segment such as the Ford Fiesta and the VW Polo.
Business Secretary Vince Cable hailed the news as a "clear vote of confidence" in this country's manufacturing industry.
The workforce at Sunderland, where Nissan first started producing cars in 1986, will increase by 400 to a record 6,000, while thousands of jobs will be created among firms supplying the factory.
It is expected that the new model, with a current concept name of Invitation, will have an initial production run of 100,000 a year, helping to cement Sunderland as the largest car plant in the UK - a position it has held for the last 14 years.
In 2011, the plant's 25th anniversary year, Sunderland set a new production record with more than 480,000 models rolling off the lines.
"This plant has a 20-year heritage in producing successful compact cars stretching back to the first Micra rolling off the line in 1992," said Trevor Mann, Nissan's senior vice president for manufacturing in Europe.
"I'm delighted that Sunderland has secured what will be another very important model for Nissan in Europe.
"The additional volume will maintain Sunderland as the country's largest car plant and we expect and look forward to a very busy future."
Mr Mann, speaking from the Geneva Motor Show, where the new car was officially unveiled, said there had been "competitive bidding" from other Nissan plants across the world to build the new car, praising efficiency levels at Sunderland.
"Production rates are very high and the plant has made year-on- year improvements for several years. It is one of Nissan's most productive plants globally."
Mr Mann admitted that the firm had some problems recruiting multi-skilled technical workers, but said it was increasing the number of apprentices it takes on.
"The investment is a boost for jobs at Nissan's plant as well as the wider supply chain," said Mr Cable.
"Global vehicle manufacturers are beating a path to the UK's door."
Nissan is one of several businesses in the automotive sector to receive conditional offers from the £2.4 billion Regional Growth Fund (RGF), which aims to support projects that will create jobs in areas of England dependent on the public sector and which are supported by private investment.
"Nissan's commitment to manufacture the all-new Invitation at its Sunderland plant is another vote of confidence in the UK auto industry and excellent news for the broader economy," said Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders
"The UK remains a globally competitive base for automotive manufacturing with its highly-skilled, flexible workforce and advanced productivity levels continuing to attract major international investment.
"Growth in manufacturing is leading the current recovery and clearly demonstrating the benefits of a rebalanced economy."
Nissan produced more than 480,000 vehicles at its Sunderland plant last year, up 14 per cent from 2010 and a new record for a single UK car plant, largely down to the success of its Qashqai model.
The Sunderland plant also makes the Juke and Note models.
“This is another sign of a growing renaissance in UK car manufacturing," said Stephen Tetlow, chief executive of the Institution of Mechanical Engineers.
“The sector is growing at over 15 per cent a year, creating thousands of jobs and driving British manufacturing out of the doldrums.
“Nissan’s Sunderland plant is the company’s most productive plant in Europe, which is both a testament to the UK’s world-class engineers and a signal as to why our car manufacturers are seeing such impressive growth.
“This is not just good news for Sunderland. The 2,000 jobs announced today will help create another 4,000 in Nissan’s UK supply chain, as the benefits of this decision ripple through the automotive sector.”