Jaguar Land Rover will expand further away from its British manufacturing base after signing a letter of intent to build a new car plant in Slovakia.
The move is designed to help boost global sales and the company said it was carrying out a feasibility study for a factory capable of reaching an annual output of up to 300,000 cars over the decade from 2018 when the plant could start production.
The plant would be based in the western Slovak town of Nitra, according to the company, which has been owned by India's Tata Group since 2008, though a final decision will be made later this year.
CEO Dr Ralf Speth said: "The expansion of our business globally is essential to support its long-term, resilient growth. As well as creating additional capacity, it allows us to invest in the development of more new vehicles and technologies, which supports jobs in the UK.
"With its established premium automotive industry, Slovakia is an attractive potential development opportunity for us. The new factory will complement our existing facilities in the UK, China, India and the one under construction in Brazil."
The new facility is aimed at in increasing the number of lightweight aluminium models produced by the company and JLR said it had turned down other locations in Europe, the USA and Mexico in favour of Nitra because of a strong supply chain and good infrastructure.
Germany's Volkswagen (VW) , South Korea's Kia and France's PSA Peugeot Citroen, all have plants in the country and Nitra is close to the VW and Peugeot facilities in a cluster of automotive suppliers with good connections to European markets by rail and highways.
Slovak Finance Minister Peter Kazimir hailed the decision, saying it was helped by the fact his country is a member of the Euro zone, unlike some central European neighbours, but Poland said today that Slovakia had offered high state subsidies which it was not prepared to match.
Slovakia's economy ministry was not immediately available to comment but a ministry source told Reuters the country would offer up to the maximum subsidy possible under EU rules.
JLR has steadily increased the number of models it builds outside Britain, opening its first overseas manufacturing plant in China in October, with another in Brazil due to open in 2016.
The country is trying to reduce its reliance on Britain, where it had to offer an improved pay and pensions deal last year to avoid strike action. The average hourly labour cost in Slovakia is below €10, less than half that of Britain, according to Eurostat figures.