Graham Nearn fell in love with the Lotus 7 after seeing it displayed at Earls Court in 1957. He was so enamoured of Colin Chapman’s brilliantly bold, original design that in 1959 he launched Caterham Cars to distribute the individualistic, two-seat sportscar. He bought the rights to the car in 1972, and continued to manufacture developments of Chapman’s design under his firm’s own name.

Built as a lightweight sports car that made no concessions to driver comfort it became renowned for its breathtaking power from small engines and remarkable handling qualities on both road and racing track, the Lotus 7 had become one of the iconic young men’s cars from its debut at the Earls Court Motor Show in 1957. Costing only £536 in kit form in the late 1950s — half the price of the fully assembled model since no purchase tax was required — the car provided fast wheels at affordable cost. Its tuned Ford 1,172cc engine, delivering anything from 30 to 75bhp, gave blistering acceleration up to 80mph to a vehicle weighing only 500kg.

When Chapman began to feel that the Seven image was running out of steam Nearn, who had always greatly admired the car, stepped in and offered to continue production at his own company. Chapman agreed, with the proviso that neither the Lotus name nor logo could be used to continue selling the cars.

The Lotus 7 thenceforth became the Caterham 7, soon to be the Caterham Super 7. Nearn became aware that it was going to be almost impossible to improve on the car’s fundamental design, but from 1973 onwards he embarked on a programme of evolution which transformed the Super 7’s capacities. The first Caterham 7s upped engine size to 1,300cc to give a maximum bhp of 115, and this process continued inexorably via 1,700cc Cosworth engines delivering 150bhp by the mid-1980s. By the middle of the following decade Caterham series cars using 1.8 litre Rover engines were delivering 250bhp — at a correspondingly higher price. Caterham 7s in kit form were by this time starting at nearer £13,000.

In the 1970s Caterham race cars were banned in the UK as being too fast for their own safety — and that of everyone else in the vicinity of the track. Nearn leapt on this piece of notoriety to produce T-shirts emblazoned with the legend “Caterham Seven, the car that’s too fast to race”. This ban and an earlier one imposed in the US were subsequently lifted, and in 2002 a 2-litre Caterham R400 won its class and came 11th overall at the Nürburgring 24-hour race, beating competition that included Porsches and BMWs in a field of 200 entrants.

Nearn was a great enthusiast for racing. He was proud that a number of notable race drivers, including Graham Hill, François Cevert and Derek Bell, had started their racing careers in Sevens.

Graham Bradshaw Nearn was born in Catford, southeast London, in 1933 and educated at Purley Grammar School. After doing his National Service, during which he was commissioned in the Army, he worked briefly in the timber trade before establishing Caterham Car Sales and Coachworks in 1959. The Caterham firm was one of the original specialists in selling the road cars manufactured by Colin Chapman’s Lotus company.

Though Caterham Cars was a general car sales and repair company, it was always closely involved in Lotus business, selling the Elite, Elan and Europa models. Nearn himself appeared in the last episode of the Patrick McGoohan television series The Prisoner, which made the Seven immortal as the car driven by “Number 6”. Nearn featured in the episode, returning the eponymous hero’s car to his Buckingham Palace Road house and lovingly running a duster over it.

When it became clear that Chapman did not want to continue production of the Seven, Nearn persuaded him to let him step in, and the car gained a new lease of life with Chapman’s blessing. The next four decades were to be ones of continuing and exciting development, with the car changing radically without losing its first feral appeal.

As sales expanded and Caterham outgrew its original site, in 1987 the company moved to Dartford, Kent, where there was more room to expand its production facility. In 1993 Caterham cars received a Queen’s Award for Exports.

In 1997 Nearn stood down from the day-to-day running of the company, and one of his sons, Simon, became manager director of Caterham Cars — though Nearn continued to be an active chairman. In 2005 the Nearn family, all of whom had been active in the business at some point, sold the company to a team led by its present chairman, Ansar Ali, himself a former Lotus general manager. In retirement Nearn divided his time between homes in Tunbridge Wells and Whitstable.

Graham Nearn is survived by his wife, Jane, and by two sons and two daughters.

Graham Nearn, founder of Caterham Cars, was born on September 29, 1933. He died of heart failure on October 24, 2009, aged 76