(Bloomberg) -- Tesla Inc. could soon become more German, if Morgan Stanley’s prediction is right.

The country would be the “logical choice” for the so-called gigafactory in Europe that Elon Musk’s electric-car manufacturer plans to announce by the end of the year, Morgan Stanley analysts led by Adam Jonas wrote in a note Thursday.

Germany “is the heart of the global luxury-auto market, with an economy dependent on internal-combustion tech and a government focused on climate change,” with authorities pursuing car electrification more aggressively than in other countries, Jonas said.

Chancellor Angela Merkel’s government and local automakers agreed this week to increase cash incentives for electric-car purchases, intensifying Germany’s effort to move away from the combustion engine to reduce exhaust emissions. Musk said in June that Germany is “a leading choice” for Tesla’s planned car-battery factory in Europe, with favored locations along the border with France, Belgium, the Netherlands and Luxembourg. Tesla’s spokesman in the region didn’t immediately respond Thursday to phone and emailed requests for comment on Jonas’s report.

READ Aug. 25: Tesla Mulls Potential Factory Locations in Germany’s Rhineland

While Poland, Hungary or the Czech Republic are seen as possible sites, “Giga Deutschland” would be the preferred outcome, enabling Tesla to take advantage of being part of the biggest economy in Europe, Jonas said. The regional foothold will help Palo Alto, California-based Tesla benefit from what Morgan Stanley projects to be one of the largest, fastest-growing electric-vehicle markets, with 6.5 million units sold a year by 2030, outpaced only by China.

--With assistance from Christoph Rauwald and Catherine Larkin.

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Tom Lavell, Jon Menon

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