DaimlerChrysler has put on hold plans to assemble cars in Russia and does not see the project being pursued in the foreseeable future, Reuters reported on Wednesday.

The company reportedly said that assembling cars in Russia was not competitive due to tax and customs rules, but added it was in talks with the Russian government.

Earlier, Reuters noted, the German Die Welt newspaper quoted a senior company official as saying: "The project is dead. DaimlerChrysler will not assemble any cars in Russia."

This would mean Daimler would not invest at least EUR80m (US$95.3 million) to open a plant near St. Petersburg with annual capacity of 25,000 to 30,000 cars, the paper reported, adding that the plan clashed with the group's cost-cutting efforts.

Reuters also noted that Russian president Vladimir Putin had said during a visit to Germany in September that carmakers Volkswagen and DaimlerChrysler were expected to set up assembly plants in Russia soon.

German newspaper Handelsblatt has reported that Volkswagen would decide in December at the latest on a plan to build cars from kits near Moscow from 2007, the news agency added.

The paper reportedly said VW aimed to produce 50,000 cars annually and eventually expand capacity to 200,000 units by 2009.

VW has said it is interested in entering the Russian market but talks were still under way, Reuters reported.