* Two new Mini models to be produced at Oxford says BMW

* Expansion will mean new jobs, investment at plant

German carmaker BMW (BMWG.DE) revealed plans to build two new Mini models at its plant near Oxford in central England on Thursday, boosting British manufacturing and the embattled motor sector.

Car makers have cut back production and jobs amid a severe downturn in sales during the recession.

The production of two new Minis is very good news for Oxford, and for the UK car industry, British business minister Peter Mandelson said in a statement.

It is a demonstration of BMW's long term commitment to the UK, he added. British drivers have had a long love affair with the Mini and I'm sure that this will continue for many years to come.

BMW's chief executive Norbert Reithofer told the Financial Times newspaper that the move would mean new jobs and investment at the facility -- which shed around 850 agency workers in February as it cut production in the wake of a slump in sales.

He declined to comment on the number of potential jobs or any timetable for production however.

It is of course fantastic news for Mini and for the plant, a spokeswoman for the Oxford plant said. It will certainly create investment. It is just far too early to say what it will do in terms of jobs ... we just don't have that detail at the moment.

The plant -- which is one of the largest in the country and has been producing Minis since 2001 -- employs 3,500 people and is operating close to its capacity of 200,000 to 220,000 cars a year.

Due to a pick up in demand, helped in part by car scrappage schemes put in place by many European governments, the plant rehired around 300 of the agency workers at the beginning of July, the spokeswoman added.

The car industry in Britain is overwhelmingly foreign-owned and employs more than 800,000 workers, 200,000 of them in direct manufacturing. The British government's 300 million pound scheme, introduced in April, allows motorists to trade in cars more than 10 years old in return for a 2,000 pound subsidy on a new model. (Additional reporting by Cecilia Valente; editing by Keith Weir and Elaine Hardcastle)