Tesla Inc.’s TSLA -1.99% international expansion is gaining momentum, with authorities in Germany and the Netherlands initiating talks with the company to build its first major European factory.
The Silicon Valley car maker, which this month announced plans to build its first overseas plant in China, has had preliminary discussions with two German states vying to host a so-called Gigafactory in Europe to build electric cars and their batteries under one roof, officials involved in the talks said.
The talks are still in their early stages, and might not yield an agreement, the officials said. Tesla has also discussed an option to build the plant in the Netherlands, said a Dutch government official, who declined to say if that option is still being pursued. Tesla’s European headquarters is in the Netherlands, where it also has a facility that works on vehicles built in California to prepare them for local markets.
Tesla declined to comment.
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Chief Executive Elon Musk last month suggested Tesla would likely announce a factory location in Europe by year’s end, and later said in a Twitter post last month that Germany was a “leading choice.” He said it would make sense to build the plant near Belgium and Luxembourg along the German-French border—which would position it near Tesla’s most important markets in Europe.
Tesla does most of its vehicle assembly at its factory in Fremont, Calif., and makes batteries at its factory outside of Reno, Nev. Mr. Musk wants to accelerate global expansion by adding manufacturing capacity in China and Europe—the world’s two biggest regions for electric-car sales.
The plant Tesla recently agreed to build in China will have the capacity to build 500,000 vehicles a year, a large factory by auto-industry standards. That has European officials hoping Tesla has similar plans for its factory there.
Discussions about a European Gigafactory come as Tesla boosts production in the face of a surge in output of new plug-in electric models from auto makers including General Motors Co. , Ford Motor Co. , Volkswagen AG , BMW AG , Renault-Nissan, and Jaguar.
Tesla is accelerating production of its Model 3 compact sedan and is preparing a compact sport-utility vehicle, to be called the Model Y. Those two vehicles could help transform Tesla from a niche luxury brand into a mass-market car company.
Officials in the states of Rhineland Palatinate and Saarland, close to France in southwestern Germany, had been lobbying Tesla for some time. After Mr. Musk’s tweet last month, they stepped up their outreach with phone calls and written invitations to Mr. Musk.
“We have done everything possible to assure that Rhineland Palatinate is in the competition for the plant,” said Ralph Schleimer, a state official in Rhineland Palatinate, who is involved in the effort. He said the state has presented its case to Tesla, but that detailed negotiations haven’t begun.
Tesla acquired a local robotics company, now called Tesla Grohmann Automation, last year in Rhineland Palatinate. Grohmann builds equipment for Tesla’s Nevada factory.
Saarland officials approached Tesla in March, then wrote to it again last month, said Anke Rehlinger, the state’s economics minister. In early July, Tesla agreed to meet, she said.
“They are looking at us to see if we fit their needs,” Ms. Rehlinger said, adding that formal negotiations haven’t begun.
Dutch officials also have been lobbying Tesla for the plant.
“We’ve had contact with Tesla,” said Michael Bakhuizen, a spokesman for the Dutch economics minister. “But we do not talk about confidential negotiations with potential investors.”
Write to William Boston at william.boston@wsj.com and Tim Higgins at Tim.Higgins@WSJ.com
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