(Adds Slovakia's reaction)
By Kim Kyoung-wha and Martin Dokoupil
SEOUL/BRATISLAVA, Jan 14 (Reuters) - South Korea's top auto maker Hyundai Motor Co may be leaning towards Slovakia for the location of a 1.1 billion euro ($1.41 billion) European production centre, a source close to the deal said on Wednesday.
Slovakia and Poland were chosen the final candidates for the location in late November, beating out the favourite, the Czech Republic, and Hungary in a battle for one of the largest greenfield investments in the region.
"It seems Hyundai is leaning towards Slovakia for the plant location, although a final decision should be announced in mid-February," said a source close to the deal.
A source at Hyundai Motor backed his view, saying "Internally, the company appears to have made a decision. I cannot reveal details but Slovakia has an edge in labour costs."
The sources declined to elaborate further.
Slovakia's economy ministry said it had received no signal from the car maker that the country would be favoured over neighbouring Poland.
"We do not have any indication from Hyundai that there was any preliminary decision taken," ministry spokesman Alexander Skurla told Reuters.
FINAL OFFERS BY END-JANUARY Skurla said the government expects Hyundai to decide on the project after it and Poland submit final, detailed offers to the firm by the end of January.
Key executives from Hyundai Motor and affiliate Kia Motors Corp , who made a tour to various sites last year, are in the final stage to pick the winner for the plant, the sources said.
Hyundai Motor plans to build the plant to secure a firmer foothold in Europe, where its sales are rising rapidly. The new factory will eventually have the capacity to produce at least 300,000 units per year, and construction is expected to begin in early 2005.
Hyundai built a $1 billion plant in the U.S. state of Alabama in April last year as part of its expansion.
In Slovakia, financial investors have anxiously awaited the announcement. They have driven the Slovak crown over one percent stronger since the start of the year on expectations of heady economic growth and foreign funds pouring into the small market.
The deal, once done, would be the latest instance of the ex-Soviet satellite luring a foreign firm with its proximity to western European markets, low wages of around $420 a month, and a 19 percent flat tax rate that analysts say is one of the most liberal regimes in Europe.
Slovakia's booming car industry is currently dominated by Germany's Volkswagen , which produces 280,000 cars per year at a plant outside of Bratislava.
Hyundai shares ended the day up 2.7 percent at 53,600 won, outperforming the wider market's 0.14 percent rise.
($1=.7831 Euro)