The company, which is rapidly expanding its model line-up and volumes, had said in August it aimed to build a plant at the western Slovak town of Nitra with an annual output of up to 300,000 cars.

On Friday, JLR, owned by India's Tata Motors Ltd (>> Tata Motors Limited), said it will begin constructing the site next spring with around 2,800 jobs created as production ramps up. "The new factory will complement our existing facilities in the UK, China, India and Brazil and marks the next step in our strategy to become a truly global business," JLR CEO Ralf Speth told reporters after signing the deal with the Slovak government in Bratislava.

JLR's new plant will operate alongside its British plants at Castle Bromwich and Solihull in the English midlands, and Halewood in the northwest, turning out models such as the Jaguar XE sports saloon and the Range Rover Evoque.

Volkswagen (>> Volkswagen AG), Kia (>> Kia Motors Corporation) and Peugeot Citroen (>> PEUGEOT) already build hundreds of thousands of models in Slovakia, which said its membership of the euro zone helped encourage JLR pick it over neighboring countries.

The Slovak government said it approved 130 million euros in state aid for the project, which helps Prime Minster Robert Fico project an image of strong economic management ahead of elections in March.

The car industry represents 43 percent of Slovakia's industrial output and a quarter of its exports, according to the Automotive Industry Association, which expects the country of 5.4 million to make almost 1 million cars this year.

Economy Minister Vazil Hudak said the JLR factory would create 12,000 jobs in supplier industries in addition to those at the factory. The central bank expects it may add 0.3 percentage points to economic growth next year, and 0.8 percent once production launches.

Hudak said JLR would invest 1.4 billion euros through 2021, when capacity should reach 150,000 cars. A further 500 million would raise capacity to the maximum 300,000.

JLR has grown rapidly since it was bought by Tata in 2008 but has suffered in recent months due to a blast at China's Tianjin port, which destroyed thousands of its cars, and a sharp decline in sales in China earlier in the year.

Speth said targets were unchanged by the setbacks. "There is no change in previous plans, China is still the biggest automotive market in the world, we can grow even more there

(Editing by David Holmes)

By Costas Pitas and Tatiana Jancarikova