Ford has confirmed that India's Tata Motors will be the likely buyer of its UK-based Jaguar and Land Rover brands.
The US giant said it is now committed to negotiations "at a more detailed level" with Tata over the sale.
Ford announced in June last year that it intended to sell Jaguar and Land Rover as a joint package.
Tata first said it was interested in August. Other parties still in the contest to buy the two car brands include private equity firm One Equity.
A spokesman for One Equity, a subsidiary of the US bank JP Morgan Chase, stressed to the BBC that Tata had not yet been granted exclusive rights to talk to Ford.
Another Indian company, Mahindra and Mahindra, has also been mentioned in press reports as a potential buyer.
'Substantive discussions'
"There is still considerable work to do and while no final decision has been made, we will proceed with further substantive discussions with Tata Motors over the forthcoming weeks," said Lewis Booth, Ford executive vice president with responsibility for Ford Europe.
A Tata spokesman said the company had already "had positive discussions" with Ford.
"We are pleased by the progress in the discussions to date and very positive about the prospects of this business going forward," he added.
A spokesman for the Business and Enterprise Department called the news "a welcome step towards resolving the uncertainty many Jaguar and Land Rover employees will have been feeling".
Meanwhile, car workers' union Unite joint general secretary Tony Woodley said: "We need further and more detailed meetings and discussions with Ford and Tata which will focus on the job security of our members in the Jaguar, Land Rover and Ford plants in the UK.
"There are also crucial issues around wages, terms and conditions and pensions to address before any final decision is considered," he added.
Unite has previously said that Tata would be its preferred buyer for Jaguar and Land Rover.
'Underpin the future'
Tata could secure the future of Jaguar and Land Rover, said car magazine AutoExpress' Dan Strong.
"They are committed to building a range of cars that are a success across the world"
"They are committed to building a range of cars that are a success across the world, and with luck this will help to underpin the future of both those historic British brands," he said.
Motor industry analysts had initially expected a private equity group to buy Jaguar and Land Rover.
Two other private equity firms said to have spoken to Ford are Apollo and Blackstone.
Yet commentators say the purchasing power of such private equity companies has been weakened by the global credit squeeze, which makes it more difficult and expensive for them to borrow the funds they rely on to fund their takeovers.
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