Tata Motors, the new owner of Jaguar and Land Rover, is looking to revive Daimler, the luxury car marque favoured by the Queen and her mother.

Ratan Tata, head of the Indian conglomerate that bought the marque as part of its $2.3 billion purchase of Ford's luxury brands, told investors that he was deciding whether to resurrect the Daimler brand.

Tata has earmarked £1 billion to develop new models at its British-based manufacturers and it is suggested that the company wants to transform Daimler into a super-luxury marque to compete directly with Bentley and Rolls-Royce. It wants to develop cars for wealthy buyers in Britain, as well as targeting rich buyers in Asia, Russia and the Middle East.

This strategy would be in contrast with its Indian plan, where the company has developed the Nano, costing about £1,250, in an attempt to create a mass market for cars in the home market.

David Smith, chief executive of Land Rover and Jaguar, suggested recently that both Jaguar and Land Rover would be taken further upmarket to the £100,000-plus price bracket. A Tata spokesman said that it was too early to say whether Daimler would be part of those plans.

Analysts believe that a new generation of Daimlers could find ready buyers. Garel Rhys, of Cardiff University, said: “Tata could make a very good job of this, especially if they target the space between where the top of Jaguar's current range ends and where manufacturers such as Bentley kick in. Daimler has a fantastic heritage.”

The Coventry-based Daimler Motor Company was formed in 1896 after Fredrick Simms signed an agreement to sell engines developed by Gottlieb Daimler, the pioneering German engineer, in Britain. The first British-built Daimlers appeared a year later and proved hugely popular. In 1899 John Scott-Montagu ran a four-cylinder Daimler in the Paris-Ostend road race with Charles Rolls, his co-driver, becoming the first British drivers to enter a renowned long-distance race.

Montagu introduced King Edward VII to the brand, which has maintained its Royal associations since.

Daimler Motor Company became a subsidiary of the Birmingham Small Arms Company in 1910. It was acquired by Jaguar in 1960 and remained with the company through its merger with British Leyland and its takeover by Ford in 1989.

Jaguar shares the rights to the Daimler name with Daimler AG, the German car manufacturer created last year when DaimlerChrysler was split up and its American operations were bought by Cerberus Capital Management, the private equity firm.

Jaguar agreed terms late last year which allow the German company to use the Daimler brand as the title of a trading company, a trade name or a corporate name - rights that it did not hold previously. The renegotiated terms did not affect Jaguar's rights to build Daimler cars. A spokesman for Jaguar said: “The extended usage agreement does not affect either company's existing right to use the Daimler name for a product.”

At present the Daimler badge is restricted to the most expensive Jaguar model - the Daimler Super Eight, which has a list price of £80,000. The model was released in 2005.

Jaguar has bounced back in terms of sales of late after the launch of a new mid-sized saloon, the XF. The brand sold 3,836 units in Western Europe last month, up 31 per cent on the same month a year earlier.

By contrast, sales at Land Rover - widely seen as, by far, the healthier company - have fallen dramatically in its biggest market, the United States. June sales in the US fell more than 40 per cent to 2,200 units in June from the previous year. Western Europeab sales dropped 36 per cent during the same period.

Mr Tata has already expressed a desire to press on with the creation of a new Jaguar, the F-type.

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