Jaguar Land Rover is set to give a boost to the Wolverhampton area by building a new factory that is set to make low-emission engines for the two luxury car brands.
The new site will cost £355m to build and will create as many as 750 jobs, and will be located on a 120-hectare plot not far from the M54 on the Staffordshire-Wolverhampton border.
JLR's chief executive Dr Ralf Speth said the news was exciting and a big investment for the company.
"We expect the engine manufacturing facility to create up to 750 highly-skilled engineering and manufacturing posts at Jaguar Land Rover, along with hundreds more highly-skilled manufacturing jobs in the supply chain and the wider UK economy," he said.
"As we invest £1.5 billion a year for the next five years in new product developments, expanding our engine range will help us realise the full global potential of both our Jaguar and Land Rover brands."
The plant will be making four-cylinder engines, something that the two companies have not offered much in recent times, with the XF the only Jaguar to come with a four-cylinder diesel at the moment.
The announcement was marked by a visit to the manufacturer by Deputy Prime Minister Nick Clegg and business secretary Vince Cable.
Experts have welcomed the announcement, saying it is good for the company as well as the midlands area.
"This is a crucial step in the development of Jaguar Land Rover. Any global car company needs to make most of its engines in-house," said Jay Nagley, industry analyst and managing director of Redspy Automotive.
"In addition, rising demand makes it economically sensible – buying in 300,000 engines a year (which is what JLR is likely to need in a couple of years) is not cheap, as any outside supplier would have to make a big investment in capacity.
"However, it does not mean all JLR engines will be in-house. It looks like JLR will make its own small diesel and petrol engines, but niche engines like the V8 will still come from Ford for as long as the demand is there."