Jaguar Land Rover (JLR), the British luxury automaker owned by Tata Motors, says the new low-emission car engine plant it is building in the UK would cost it £355 million (Rs2,662 crore).

The plant would be built at the enterprise zone i54 business park in Wolverhampton, central England, which would create up to 750 jobs and hundreds more indirectly in the supply chain.

The new plant is expected to be operational within the next two years.

JLR's chief executive Dr Ralf Speth said it was "truly exciting news" and "a major commitment for our 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 added.

Without releasing any technical details or engines for the which models the plant would make, JLR said that the new four-cylinder diesel and petrol engines would increase its capability to offer high-performance engines while ensuring significant reductions in carbon dioxide emissions.

Since May, Tata Motors, India's largest automobile company, had been weighing options to to set up the plant either in south Wales or India, (See: Tata Motors to set up new JLR engine plant) but may have opted for the i54 business park because of its proximity to JLR's manufacturing plants in the Midlands, and the incentives and tax benefits given by the UK government for locating the plant at the enterprise zone.

The UK government has offered JLR around £10 million for the plant in a bid to attract new companies to set up businesses at the new enterprise zone.

The David Cameron government's decision to now back Tata Motors is a major turnaround after the Gordon Brown government put such onerous and humiliating conditions on JLR for merely underwriting less than half the €366-million loan passed by the European Investment Bank during the peak of the global recession in 2009.

With an improving global economy and JLR making a dramatic recovery, in October 2010 Tata Motors scrapped its earlier decision to close one of the plants in the West Midlands, shortly after revamping its top management with the induction of Carl-Peter Forster as the new group CEO of Tata Motors and Dr Ralf Speth as the new chief executive of JLR in February 2010.

JLR produces its Land Rovers at plants in Solihull and Halewood in Merseyside and Jaguar models at Castle Bromwich, near Birmingham, and also has two product development centres in the UK.

Warwickshire-based JLR buys engines from the Ford Motors Bridgend and Dagenham factories in the UK.

JLR's plan to set up its own engine plant is seen as a move to gain control of engine production at a time when its sales have picked up in the international market, particularly China.

Tata Motors had acquired JLR from Ford in 2008 for $2.3 billion, and as part of that deal, it entered into multiple contracts to buy engines, parts and technology from the American carmaker.

This agreement is scheduled to expire around 2015, and Tata Motors could look at alternative sources for getting engines, including making its own since its agreement with Ford does not prevent it from doing it.

Since last year, the marquee British brand had been working with Ford to increase supplies of engines after a larger-than-expected jump in sales left it facing a shortage.

After the global economy began recovering in 2009, Tata Motors has been investing £1.5 billion a year in JLR's product development by bringing out new models.

The multi-billion dollar investment will see the development or upgrade of 40 new vehicles across the two brands over the next five years.

JLR recorded a pre-tax profit of £1.1 billion and sold 245,000 cars last year, of which, more than 24,500 cars were sold in China. JLR now accounts for 10-per cent of all British exports to the Middle Kingdom.

The company has also expanded its workforce in the UK from 14,500 in 2009 to almost 21,000 today and has up to 140,000 in the supply chain.