Nissan, Japan's third biggest automotive group, is to plough £200 million into electric car production in a move which will create 350 new jobs and could safeguard thousands more.

The car giant announced today plans to invest in a new factory in Sunderland, within the site of its existing plant, which will create lithium-ion rechargeable batteries.

The move, which will involve an investment of £200 million over five years, will pave the way for the production of electric vehicles.

The Prime Minister said the investment - a rare boost for Britain's recession-hit motor industry - would create 350 new jobs and safeguard hundreds more in the supply chain.

The move could also help to ensure a future for the 4,000 plus workers employed at Nissan's existing Sunderland plant.

Mr Brown said: "Nissan's investment in a new battery plant and its hope to start producing electric vehicles here in Sunderland is great news for the local economy.

"Sunderland could now be a strong contender to produce electric vehicles for Nissan in Europe and we will continue to work with Nissan to ensure this happens."

Nissan is the biggest single-site employer in the North East, employing 4,200 people and Britain's biggest carmaker by volume.

In April, the European Investment Bank approved the investment of hundreds of millions of pounds to be split between Nissan's operations in Britain and Spain for the production of low-carbon emission vehicles.

Last week, rival Toyota announced that it would build a hybrid petrol-electric version of its Auris Hatchback at its own plant in Burnaston, Derbyshire. It will be the first hybrid Toyota model to be made in the UK, with production expected to start in 2010.

The Government wants the UK to become Europe's leading manufacturer of electric vehicles. It said it was working with Nissan to support the project with grants and loan guarantees.

Sunderland will now become the UK's first so-called Low Carbon Economic Area (LCEAs), specialising in ultra-low carbon vehicles. LCEAs were introduced by the Government last week in its Carbon Industrial strategy.

Under the scheme more than 700 charging points are to be installed in a range of locations in the NorthEast, including supermarkets, shopping centres and public buildings.

In January last year workers at Nissan's Sunderland factory were among the first victims of the British car industry crisis when 1,200 positions were cut. The toll included 800 permanent jobs and 400 temporary contracts.

The group said at the time that the cuts were necessary to "ensure we are in a strong and viable position once business conditions return to normal."

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