Project Kimber, a consortium of international auto executives, has chosen Wales to site a new assembly plant that will build re-branded and re-engineered versions of the Smart roadster and coupe sports cars that recently ended production at DaimlerChrysler.

The decision was made after consultation with prospective investors and with support from the Welsh Assembly government's International Business Wales team. A number of suitable sites in South Wales are now being considered.

Locations in the UK's West Midlands and in the German States of Saxony and Thueringen were also considered.

Project Kimber, Smart and DaimlerChrysler are holding meetings to prepare firm contracts to replace the memorandum of understanding signed in February.

Discussions with potential investors in the UK and North America are "at an advanced stage", the compant said. If talks proceed to plan, production is expected to commence around mid-2007 with first-year volume of 8,000 units.

Wales was chosen for such reasons as the strength and flexibility of the automotive component supply chain, the relevance of the location to the 'British-ness' of the cars, the level of expertise and R&D capability within Welsh University centres of excellence, the availability of a skilled workforce, a significant conditional offer of grant aid, and the support of the Welsh Assembly government and the Wales Automotive Forum, Project Kimber said.

Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University, described the decision as significant not just for Wales, but for the UK as a whole.

"It demonstrates that the UK and Wales are still good and efficient locations for the motor industry," he said. "This is a well-founded investment based upon a proven product originally developed and made by one of the world's foremost automotive companies."