Four locations in Coventry are in the running to become a new motorcity which could act as a "honeypot" to attract niche vehicle makers into the region.
Up to 30 niche vehicle manufacturers could set up at the proposed 23-acre site, which will create an initial 500 jobs.
Advantage West Midlands is supporting the £15 million project.
The former Massey Ferguson factory at Banner Lane, Tile Hill, is thought to be the favourite for the site, which will enable firms to cooperate and pool their resources in the small scale production of vehicles.
Other locations under consideration include the former Rolls Royce site at Ansty and Peugeot's doomed factory at Ryton, just outside the city.
A site near to Coventry, at Kenilworth, where technical engineering firm Prodrive is hoping to invest £100 million on a new research and development centre, is also under consideration.
Coventry is thought to be the favoured location because of the availability of land, while a number of existing niche manufacturers are already located close to the city.
It is hoped the site could generate jobs for former car industry workers who worked at Jaguar's Browns Lane factory as well as Ryton, which is due to close next year with the loss of 2,300 jobs.
The chosen location would enable manufacturers to share showroom, back office and even technical facilities. But each of the proposed sites face obstacles.
Roger Dowthwaite, director of economic development at the Coventry, Solihull and Warwickshire Partnership, said: "The favourite is the former Massey Ferguson site in Tile Hill.
"This would be readily available and, although the site has been sold to Persimmon, part of it is earmarked for employment use. It would also have access to a pool of skilled labour in the automotive industry and be very attractive to small, niche car manufacturers."
Mr Dowthwaite said the 100-acre site at Ansty was too big, while it was too early to decide on the future of Ryton while Peugeot still made cars there.
He added: "Banner Lane is the favoured site. Discussions have been underway and we are hopeful there will be a positive outcome soon.
"To have a site like this in Coventry would be fantastic, it retains the city's interest in vehicle manufacture but recognises that the days of volume production in this country are probably over.
"As time goes on, more and more manufacturers will turn to niche markets, and this will hopefully act as a honeypot and attract more."
Coun Ken Taylor, leader of Coventry City Council, said he was delighted his city was likely to be the location for the development, which is due to be up and running within the next two years.
He said: "We would support any moves to bring this motorcity to Coventry. There is a huge number of small, niche, car manufacturers around Coventry, and this would be a boost to them.
"There are some people producing stuff for Ferrari, I believe. This development would be very welcome in Coventry, where we have a very highly skilled workforce who can work in this part of the automotive industry."