The first ever British car was built in Coventry nearly 120 years ago. Now there are ambitious plans to re-establish the city as the heart of the country’s recovering automotive industry. Carmakers, suppliers, universities, the local authority and the government have united in an attempt to turn Coventry into Britain’s “motor city” again, with hundreds of millions of pounds being invested.

After the first British car was built by Daimler in 1897, Coventry’s manufacturing industry grew until it reached a peak in the 1950s and 60s. At this stage, the UK was the second-biggest carmaker in the world and a host of the major companies were based in and or around Coventry, including the British Motor Corporation (maker of the Mini), Jaguar and Rootes Group, which later became part of Chrysler and then Peugeot. During this period, the average wage in Coventry was about 25% higher than the rest of the county.

However, as the car industry fell into decline, so did Coventry, providing Britain with a similar story to the downfall of Detroit in the US, albeit on a smaller scale. In the late 1970s and early 1980s it is estimated that the top 15 employers in Coventry cut their combined workforce by almost half. Today, the only significant car production in Coventry is of London’s black cabs, made by the Chinese-owned London Taxi Company. Jaguar closed its Browns Lane plant in 2005.

However, Coventry has gradually emerged as a research and development (R&D) hub, primarily thanks to the recovery of Jaguar Land Rover and Warwick Manufacturing Group (WMG), a research partnership between the University of Warwick and leading manufacturers in the city.

Next year, the city’s R&D sector will be boosted with the opening of the National Automotive Innovation Centre. The £150m project, backed by JLR, WMG and the government, will become a base for advanced research, with academics and engineers working together. In addition, JLR has laid out expansion plans for the area worth almost £500m, which it says will make Coventry the “hearts and brains” of the company.

It will significantly expand R&D operations at its headquarters at nearby Whitley and build new offices at a site called “Gateway North”. Crucially, however, it is also understood to be planning a major new car factory, meaning mass production could return to Coventry for the first time in more than a decade.

The man overseeing the rebirth of Britain’s motor city is Lord Bhattacharyya, who founded WMG in 1980 and is an adviser to Tata, helping to broker its takeover of JLR in 2008. “JLR is now next door, there are suppliers coming here, and there may be one or two other car companies who might be here,” he explains. “I want it to be very similar to Stuttgart, or Munich, or Michigan. Coventry city council is very cooperative in doing that, which is a central factor.

“The combination of Coventry city council and us and say JLR – we can produce a motor city here. There are various things that JLR is thinking of doing here that I can’t talk about, but they are expanding hugely. Already they have created nearly 5,000 jobs in Coventry over the last five years.”

Bhattacharyya says such an industrial renaissance would require strong infrastructure, impressive R&D facilities, and a wide collection of suppliers. “You don’t put a motor city in the desert,” he says. “Motor city means you have facilities for the skill base, facilities for infrastructure, facilities for easy planning. There are all sorts of things you need.”

The optimism in Coventry is in stark contrast to the gloom surrounding the future of the steel industry and Tata Steel’s UK business, a far more challenging investment for the Indian company.

Analysts believe the plans for Coventry are credible. The Society of Motor Manufacturers and Traders has forecast car production in the UK will clear 2 million a year by 2020, the highest level on record.

David Bailey, professor of industry at Aston University, says: “There is an arc of research and development that goes from Horiba Mira [a research hub north of the city] into Coventry itself and then down to the motorsport industry and Silverstone. Probably about 90% of R&D in the motor industry is in that space. It is a fantastic asset.

“We don’t do low-level assembly any more in the UK. We do design-intensive cars and we are going into low carbon. We are about to be able to make more cars than ever before, remarkably.”

However, Bailey says the UK needs to boost its car-parts sector in order to develop the automotive industry further. Just 40% of the parts on UK cars are from domestic sources, compared with 60% in Germany. “We need to do more on the supply chain,” Bailey says.

No matter how the plans for Coventry develop, WMG is already a world leader in its field. It was founded by Bhattacharyya, a Labour peer, in an attempt to breathe new life into British industry.

Bhattacharyya was born in India but came to the UK to take up an apprenticeship with Lucas, which made parts for cars and planes, and was unimpressed by what he found.

The concept of WMG was that the university would train graduates, with the companies paying for it and guiding the research. Today it has more than 600 staff, 4,000 students, and a research budget of £200m. It has tie-ups with more than 1,000 companies, although JLR and Tata are its leading partners and conduct their advanced research at the site.

Sajid Javid, the business secretary, visited WMG last month to open its new energy innovation centre, which Bhattacharyya believes can make Britain a world leader in the development of battery technology.

“New products are accelerating in this area, whether it is electric cars, solid batteries, liquid cells. The speed of development is huge, absolutely huge,” Bhattacharyya says.

Leading companies are being attracted by WMG’s work in battery technology and driverless cars. A major global technology company is in talks to start working with WMG, but Bhattacharyya will not reveal its identity. “We want to be able to develop very quickly an electric car which is for the ordinary public,” he says.

“All this business you see in the newspapers with Google and driverless cars. It will come in 50, 40, 30 years’ time, but you need the infrastructure for it. So when people talk about low-emission cars, it’s not just the battery, it’s a combination of things – how you control the car, how you drive the car, how you make the car lighter. It’s the totality of it that will give you whatever you want.”