But as well as tax breaks, the location makes a lot of sense in other ways. Just off the M54 motorway, the site is close to JLR's assembly plants in the Midlands and on Merseyside, so means that engines can be transported quickly to JLR's Castle Bromwich, Solihull and Halewood plants. And the region still offers a rich engineering skills base on which the new plant can draw,

The plant is likely to involve a £355 million investment, could employ as many as 750 workers, and - depending on how many components JLR sources locally - could bring more jobs and wider benefits to the region's components industry.

JLR currently buys engines from its previous owner Ford, but with JLR production being ramped up, it has struggled to source enough engines from Ford's UK engine plants at Dagenham and Bridgend. JLR wants more control over the supply of its engines, and has the in-house engineering skills needed to develop new engines.

The firm is already assembling cars in India (so expect as well an engine plant there at some time) and recently said that it is in "very intense discussions" with a Chinese manufacturer about setting up an assembly joint venture in China. That would help avoid some punitive tariffs on imports to the rapidly growing Chinese market, but would need a joint venture given Chinese government regulations.

The firm's ambitious plans for models beyond the (stunning) newly launched Range Rover Evoque were highlighted at the recent Frankfurt motor show. There JLR unveiled three new concept cars, including a keenly-awaited two-seater sports car seen as the spiritual successor to the iconic E-type and an eye-catching replacement for the long-running Land Rover Defender model.

New models are needed if the firm is to increase sales and output. On this, JLR certainly has ambitious expansion plans, aiming to take output to 300,000 units a year by 2015. But that's still small compared to the likes of rivals such as BMW and Mercedes. Even if JLR doesn't need the same scale as it sells at a higher premium, longer term it still needs bigger volumes to generate the cash for new model development.

Developing new models is a very expensive business, so firms need to sell as many variants as possible across different variants and brands to recoup those costs, even in the premium segment of the market. Here, though, prospects look good in that JLR can indeed grow its business significantly over the next decade - both here in the UK and by assembling in India and China - if it gets the cars right. So far its recent models under Tata have been winners and, as noted, its product pipeline for the future looks very exciting.

This remarkable turnaround has been driven by rapid sales growth in emerging markets like China (where JLR cars are seen as status symbols by the burgeoning middle class), solid results in other markets like the US and the UK (where Land Rover has had record sales of late), big investment from Tata in research and development and new models, and a concerted effort by everyone at the firm to get costs down.

Add in a whopping £5 billion investment by Tata in JLR to improve quality and bring a clutch of new models to market, and it's not surprising that JLR's £1 billion bond issue earlier this summer was significantly oversubscribed, given the excitement and confidence around the firm.

New models and more output means more engines, hence the new engine plant. The latter is a welcome boost in terms of new jobs and investment, but is also welcome in anchoring JLR in the region (it wasn't long ago that there was talk of a JLR plant closure), and in boosting confidence in the region's auto industry. And it's a sign that the region still has a rich skills and research base on which to draw.

Put simply, making engines in the region makes a lot of sense for the firm.

Professor David Bailey works at Coventry University Business School.