Project Kimber, the business and automotive engineering consortium that launched an unsuccessful bid to buy MG Rover out of administration, is to build a new sports car in Wales.
Hopes that the venture to build re-branded and reengineered versions of the DaimlerChrysler Smart Roadster and Coupe sports cars would come to the West Midlands died yesterday.
It was announced at the British International Motor Show in London that Project Kimber had chosen Wales over the West Midlands and sites in Germany as its preferred base.
No location has yet been revealed but it is believed manufacturing could take place at a former Panasonic car speakers plant at Port Talbot which closed last year with the loss of more than 200 jobs.
The group chose Wales after consultation with prospective investors and with the support of the Welsh Assembly Government's International Business Wales team.
"A significant conditional 'in principle' offer of regional selective assistance grant aid has been made by the Welsh Assembly Government," a statement said.
Three-way meetings are now taking place between Project Kimber, Smart and Daimler Chrysler to replace the memorandum of under-standing signed in February with firm contracts.
These are expected to be concluded in the near future, as are negotations with potential investors in the UK and North America.
Production is expected to start in mid-2007 and a target output of 8,000 cars has been pencilled in.
"A combination of factors made Wales the preferred location," the statement from the Welsh Assembly Government said.
These included the offer of grant aid, the strength of the Welsh automotive supply chain, the availability of R&D expertise and facilities, and a skilled workforce.
Andrew Davies, Welsh Assembly Government minister for enterprise innovation and networks, said: "The proposals by Project Kimber are very interesting and if successfully concluded will be a major boost for the Welsh automotive sector.
"Wales has a mature infrastructure to support the development and manufacture of niche vehicles - typically, low to medium volume, specialist vehicles.
"Its strengths include highly specialised automotive component manufacturers in the supply chain with the capability and flexibility to deliver low volume niche products to OEMs."
Professor Garel Rhys, an automotive expert at Cardiff Business School and a leading commentator on the industry, said it was a "very significant development not just for Wales, but for the UK as a whole".
He added: "It demonstrates that the UK and Wales are still good and efficient locations for the motor industry.
"This particular investment is well founded because it is based upon a proven product originally developed and made by one of the world's foremost automotive companies.
"It is clear that the care and attention given by Project Kimber to this development means that it has every chance of even greater success in the future. Indeed it could be the basis of a major specialist automotive cluster in Wales."
If negotiations are successfully concluded Project Kimber will be the first car manufacturer to set up in Wales.
About 50 major international component manufacturers and some 300 smaller companies operate in Wales.
Major plants include Ford's engine plant at Bridgend.
Automotive is Wales's biggest manufacturing sector. It employs about 28,000 people and has collective annual sales of about £2.5 billion.