The package will safeguard jobs and help boost demand at dealers, reports The Sunday Times.
It may also lead to the scrapping of controversial changes to vehicle excise duty, scheduled to take effect in March.
A further proposal is to incentivise companies renewing fleets of older vehicles for new, more fuel-efficient ones.
It comes on the back of depressing October results, with new car registrations down 23 per cent. Many commentators expect 2009 to be even worse, with annual sales dropping below 2 million vehicles.
The Sunday Times reports that a number of industry leaders are seeking an urgent meeting with Mandleson, transport secretary Geoff Hoon and other Treasury ministers.
Jaguar Land Rover chief executive David Smith is one of the leaders lobbying the Government, reports the paper. Of conditions, he said they are ‘the worse we have ever seen.’
‘And it has been a sudden and sharp drop. After Lehman Brothers collapsed, we saw a rapid fall-off.’
In separate news, the US Government is said to be considering direct assistance for beleaguered GM, Ford and Chrysler. Ford and GM lost through £4.5bn in the last quarter alone: GM has warned it does not have enough in reserve to last through next year.