Italian automaker Fiat signed a deal worth 305 million dollars (194 million euros) with Russia's Severstal-Auto on Saturday to produce cars and engines in Russia, an official statement said.
A joint venture will initially produce 50,000 Fiat Linea cars per year, said a statement from local authorities in Tatarstan in the Volga region, where the factory will be based.
The deal — signed on the sidelines of an economic forum in Saint Petersburg — is the latest example of a rush of foreign automakers to Russia, which is set to become Europe's biggest car market in the coming months.
The first Fiat Lineas are to be produced by the end of this year using an existing plant. A new factory is to be built by 2009, and capacity could reach 150,000 cars per year, the statement said.
“The investment in the full cycle of production … will be around 120 million dollars,” the statement said. An additional agreement to produce diesel engines was worth at least 185 million dollars, it continued.
Severstal-Auto makes Russia's UAZ trucks as well as other Fiat models. The deal signed on Saturday includes the creation of a distribution company that will handle sales in Russia.
