The Slovak government has confirmed that it will give Volkswagen a tax break to expand production at its Bratislava plant.

The move will be worth around US$20m or 431m crowns. Volkswagen said it would invest 9bn crowns in the plant over three years, and create 760 new jobs by 2012.

The government said the new model would be from the A00 product range, suggesting it is most likely the new Up! A recent local press report said VW had considered producing the car at Skoda Auto in the Czech Republic, but the Czech koruna's appreciation and higher set-up costs made that location too costly.

Volkswagen currently produces the Audi Q7 and Touareg as well as parts for the Porsche Cayenne at the plant.