The Dundee-based Michelin tyre facility is to get a £16.5 million investment that will support additional properties and new manufacturing equipment.
The largest part of the investment will come from the tyre manufacturer itself which will invest £12 million in the site to support demand for larger tyres.
Scottish Enterprise will contribute a £4.5 million Environmental Protection Grant to the project.
The new development offers an opportunity for significant environmental improvements through a new manufacturing technique that will help reduce CO2 emissions by 7,140 tonnes per year.
First Minister Nicola Sturgeon said: “Michelin is a global leader in developing the latest technology and this investment in making the next generation of fuel efficient tyres is another great example of a highly innovative company.
“This commitment and investment in the Dundee site will support the 850 fantastic, skilled workers here to remain at the cutting edge of their industry and help the worldwide drive to the low carbon economy.
“Michelin’s investment in Scotland is testament to our thriving manufacturing industry and its position as a key growth sector for the economy.
“Their continued commitment is proof of the skill and value of the Scottish workforce.”
Adrian Gillespie, managing director of growth companies, innovation and infrastructure at Scottish Enterprise, said: “It is fantastic news that Michelin have chosen the Dundee site as the location for the first industrial scale implementation of their new electric curing technology, helping make the site even more efficient, growing the range of tyres it is capable of manufacturing, and helping to secure its future growth.
“Working closely with the Michelin leadership in Dundee we’re delighted to play a part in making this happen through Environmental Aid.”
Michelin Factory Manager John Reid said: “We’re delighted the First Minister is here to announce this significant investment.
“It represents a very important step forward for the factory and forms part of a much bigger investment to transform the plant.
“None of which could we have achieved without the fantastic support of Scottish Enterprise.”