Toyota is to invest £240m in upgrading its UK factory that makes the Auris and Avensis models.
The Japanese carmaker’s investment in the Burnaston plant near Derby will allow production of vehicles using its new global manufacturing system.
The factory employs about 2,500 people, while another 590 work at Toyota’s engine plant at Deeside, North Wales.
Burnaston made about 180,000 vehicles last year, most of which are exported to Europe and other markets.
Johan van Zyl, chief executive of Toyota Motor Europe, said the investment showed that the company was doing all it could to make Burnaston more competitive.
However, he warned: “Continued tariff-and-barrier free market access between the UK and Europe that is predictable and uncomplicated will be vital for future success.”
Industry trade body the SMMT said in January that uncertainty around Brexit and the UK’s future trading arrangements had hit investment in the car sector.
Investment commitments in the UK automotive sector last year totalled £1.66bn, down from £2.5bn in 2015.
Business Secretary Greg Clark said Toyota’s investment “underlines the company’s faith in its employees and will help ensure the plant is well positioned for future Toyota models to be made in the UK”.
The government is providing £21.3m in funding for training, research and development, and improving the Burnaston plant’s environmental performance.
Last year, rival carmaker Nissan said it would build both the new Qashqai and the X-Trail SUV at its Sunderland plant following government “support and assurances”.
John Moylan, industry correspondent
The decision to upgrade the plant to take Toyota’s New Global Architecture, its new system for producing vehicles worldwide, suggests the company sees the UK as part of its long-term future.
But the UK’s automotive industry knows that Brexit is coming and with it the possibility of tariffs and complex customs arrangements.
That threatens the competitiveness of carmakers that rely upon the kind of just-in-time manufacturing which Toyota pioneered.
The general secretary of the Unite union, Len McCluskey, said Toyota workers “need to know that the government has their back and will do whatever is necessary to ensure new models and new investment keeps coming to Britain”.
“With discussions set to start on the replacement of models such as Vauxhall’s Astra and decisions due on BMW’s electric Mini, it is vital that ministers calm nerves by stating they will secure tariff-free access to the European single market and customs union in Brexit negotiations.”
In January, Toyota announced it was planning to spend $10bn (£8.2bn) in the US over the next five years.
The firm lost its crown as the world’s biggest carmaker to Volkswagen last year.
Last month, Toyota said it expected to report net profits of 1.7 trillion yen ($15.1bn; £12.1bn) for the 2016-17 financial year. However, that was lower than the 2.1 trillion yen profit it recorded a year earlier.