Jaguar Land Rover could argue it needs a government loan to fund research into greener engines, a professor says.
Tom Donnelly, professor of automotive business at Coventry University, said green deals had been discussed by other governments to help European firms.
He said research made a stronger case than simply asking for a blank cheque to help temporary cashflow problems.
Talks between Jaguar Land Rover and the government are due to resume next week over short-term financial assistance.
'Huge case'
The company, which has its HQ at Gaydon, Warwickshire, was bought from Ford by Indian motor giant Tata in March for £1.15bn.
It employs about 16,000 staff at plants in the West Midlands and at Halewood, Merseyside, and announced in November that it would let 850 agency staff go by the end of the year.
It previously said 600 other jobs could go, citing "unprecedented trading conditions".
Prof Donnelly said: "The car industry is really suffering at the moment. This situation is not unique to Jaguar Land Rover and a huge case will still need to be made.
"But funding research is preferable to simply asking for a handout to spend on what it likes and governments are also under pressure to cut carbon emissions.
'Mega bucks'
"I don't know how much money we are talking but it will not be a small amount. We are definitely talking mega bucks as research is not a cheap option."
Prof Donnelly said General Motors had invested £750m of its own money in developing a battery engine to generate electricity.
He said funding research would be a legitimate way for the British government to help car makers and suppliers without setting a precedent to bail out every industry hit by the economic downturn.
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