Russia's Moscow-based truck manufacturer ZIL may start assembling trucks and buses for China's First Automotive Works (FAW), Vedomosti business daily reported Monday citing Konstantin Laptev, director of the Moscow Automobile Company (MAC), which manages ZIL.

Prime-Tass said Vedomosti did not get any comment from FAW, but a source close to the company said that talks with ZIL are only in the very early stages.

According to Laptev, ZIL can no longer afford to design and build its own new models and needs to secure licences from foreign partners to assemble their vehicles.

Laptev told Vedomosti that MAC is now negotiating a deal with FAW to assemble four truck models and two bus models. He added that ZIL could start assembly of FAW vehicles as soon as this year.

ZIL estimates the demand for small buses in Moscow and St. Petersburg at 5,000-7,000 vehicles annually. Laptev said that FAW buses assembled by ZIL could have a sticker price of $US35,000-40,000.

According to Vedomosti, in 2004 ZIL sold 14,778 vehicles. The company's revenues in January-September 2004 were $116 million, while its net loss was $32.8 million. The Moscow city government holds a 90% stake in the plant.