NISSAN will begin building the Leaf electric compact car at its Sunderland plant from early 2013, securing hundreds of jobs.
The site will start with annual production capacity 50,000 of the zero-emission vehicles.
The investment is backed by a £20.7m government grant and up to £220m from the European Investment Bank.
Nissan’s move is part of a £420m investment in electric cars.
Business Minister Peter Mandelson said in a statement: "This investment is a fantastic vote of confidence in the Sunderland plant and its excellent workforce."