Volkswagen plans to start assembling cars under the Skoda brand at its yet-to-be built plant in Russia's Kaluga by the end of 2007, chairman Bernd Pischetsrieder, said in an interview with Russian business daily Vedomosti.

By 2009 VW will build welding and painting units and start production of a VW model, which will be designed especially for Russia, Pischetsrieder said, according to Prime-Tass. The painting unit will have a capacity of about 50,000 cars per year.

VW is currently in talks with several producers of car components, including Magna and Magnetto, on supplies to its Russian plant, Pischetsrieder said. But it is too early to say when VW's suppliers may open their plants in Russia. VW plans to bring the share of car components made in Russia in its cars to 60%-70%.

VW would like a 5% share of the Russian car market, Pischetsrieder said.

VW will officially start construction of its EUR400m plant on Saturday, according to earlier reports. Pischetsrieder and Russia's economic development and trade minister German Gref will attend the ceremony to mark the start of the construction.

Prime-Tass noted that VW signed an agreement with the economic development and trade ministry in May to build its assembly plant. Under the agreement, the plant will get industrial assembly status. A car manufacturer can apply for industrial assembly status if it plans to produce more than 25,000 vehicles annually in Russia. It would then be exempt from paying import duties on car components or pay only a 3% duty instead of the usual 15%, under a Russian government ruling from April 2005.

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