Tata, the Indian conglomerate that is set to unveil “the cheapest car in the world” next week, has emerged as the preferred bidder in the race to buy Jaguar and Land Rover from Ford.

The struggling US giant said that it was “committed to focused negotiations at a more detailed level with Tata Motors concerning the potential sale of the combined Jaguar-Land Rover business”.

The luxury marques are expected to fetch up to a total of $2 billion, though sources close to the sale say that the terms under which Ford would provide ongoing engineering support and components have proven troublesome and that a deal may not be finalised for some weeks.

Tata also has to negotiate a settlement with pension trustees and will attempt to convince unions that the 15,000 British jobs accounted for by Jaguar and Land Rover at plants in Solihull, Castle Bromwich and Halewood are not at risk of being offshored to India.

Ford, which is struggling to rebound from a record $12.7 billion (£6.3 billion) loss last year and recently sold off Aston Martin as part of ongoing restructuring, added: “There is still a considerable amount of work to do … no final decision has been made.”

Separately, Ford said that in December it posted a 9 per cent slump in sales compared with a year earlier. Full-year sales for 2007 were down 12 per cent from a year earlier at 2.57 million vehicles.

Tata said it was confident of buying Jaguar and Land Rover. “We are pleased by the progress in the discussions to date and very positive about the prospects of this business going forward,” a spokesman said.

The news confirms that Tata has inched ahead of rival bidders including One Equity Partners, the JP Morgan backed vehicle led by the former Ford chief executive Jacques Nasser, and Mahindra & Mahindra, another Indian group that had mounted a joint approach with Apollo Management, the private equity house.

Last year, Tata, whose interests run from tea plantations to IT outsourcing, confirmed its global status by buying the Anglo Dutch steelmaker Corus for £6.2 billion. Its international buying spree has also included Tetley, the tea maker, Daewoo's commercial vehicle arm and the Ritz-Carlton hotel in Boston,

Winning the Jaguar and Land Rover brands, however, would open a radically new chapter in the company's history. While Tata’s trucks dominate the highways of India and the company has made passenger cars since 1991, acquiring the marques would represent a foray into unchartered luxury territory.

Chairman Ratan Tata has already acknowledged the image disparity Tata would face in owning two of the industry's most prestigious brands while producing what it claims will be the world's cheapest automobile: the "one lakh car" (one lakh is 100,000 rupees or £1,200) due to be unveiled at the Delhi's Auto Expo, which begins next week.

But he has brushed aside concerns, suggesting that Tata is only emulating proven strategies. “Toyota created Lexus, Nissan has Infiniti." he recently told The Times. "No one is saying ‘how can BMW handle the Mini?' but they've made a huge success of it. So why is it impossible?”

Ford, which has also been in talks with the Government over the future of Jaguar and Land Rover, said in November it expected to wrap up a sale early this year. It is under pressure to pay down its debt mountain, which Fitch, the ratings agency, estimates has grown by more than $21 billion since 2001.

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