BMW, the German car group, is considering plans to increase production of its Mini range at Oxford to about 200,000 a year to meet booming demand.

Helmut Panke, BMW's chief executive, indicated that Mini sales could top 165,000 this year after last year's record of 144,000. Current annual output is about 160,000.

There have been fears that capacity constraints at Oxford could force some Mini production abroad, but Mr Panke said the car would be built only at Oxford, where BMW planned to remove bottlenecks. One option being considered is to lengthen shifts from eight to nine or 10 hours.

Mr Panke told reporters in London that, with an annual productivity increase of 4%, output at BMW car plants could grow by between 40,000 and 50,000 units a year - with minimum investment. Increased output and sales of the Mini, which launches a convertible model next year, are integral to BMW's plans to lift global sales from 1m now to 1.4m by 2008, including 1,000 new Rolls-Royce Phantoms.

The BMW chief hailed the Mini as "a UK manufacturing success story", belying the myth that Britain's manufacturing sector was in terminal decline. He urged the government not to believe that the country could survive solely as a service sector economy. "Call centres will not just go to India - within 10 years, Britain will be unable to compete with Azerbaijan and, later, the Mongolian Republic," he said.

Manufacturing, such as the car industry, provided economic stability and jobs through long-term investment. He also urged the government to join the euro to encourage investment.

He made plain, meanwhile, his distaste for a reported £13m trust fund set up for directors of MG Rover, the loss-making car company sold to them by BMW for £10 three years ago along with a £500m repayable cash dowry.

Mr Panke insisted that BMW had kept its side of the bargain by helping to preserve thousands of Birmingham jobs, adding: "If the impression is given of a small group of individuals benefiting more than the entire workforce, that would be bad."