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A senior official in Kaluga praised on Thursday a decision
A senior official in Kaluga praised on Thursday a decision by French carmaker Peugeot Citroen to build a plant in the region, located some 180 km (84 miles) southwest of Moscow.

The automaker said in a statement earlier on Thursday it would build a factory in Kaluga to produce mid-range cars similar in size to the Citroen C4 and Peugeot 308 models. The factory is expected to begin production by 2010, producing 100,000 vehicles a year for the Russian market. Output is eventually expected to rise to 300,000 cars.

"We are glad that six months of difficult and proactive talks have led to the decision, which is very positive for us," said Maxim Shereikin, head of investment at the regional economics ministry.

Shereikin said the regional administration and the French carmaker would sign a construction agreement at the start of 2008, and the draft had been already coordinated by the parties.

PCA Peugeot Citroen signed a deal to assemble cars in Russia with the economics ministry in June.

Mid-range cars account for 60% of sales on Russia's rapidly growing auto market, the company said, declining to reveal the size of its investment in Kaluga.

A source in the Russian economics ministry said on Thursday Mitsubishi Motors also planned to build a factory in Kaluga. The ministry and the Japanese auto giant signed a memorandum on production in Russia in September.

"Like Peugeot Citroen, Mitsubishi will build a factory in Kaluga," an official said.

The two auto giants earlier also considered Russia's northwestern region of Pskov, Nizhny Novgorod in the Volga area and St. Petersburg as possible sites for their assembly lines.

The Kaluga region has also been chosen as plant sites by Volvo Trucks and Samsung under deals signed in June. The Swedish producer will invest 3.5 billion rubles (about $135 million) in the region and create about 1,000 jobs. The South Korean producer of household and electronic appliances will also invest around $135 million and create 1,200 jobs there.

Volkswagen began the construction of a factory in the region in January 2007 and is scheduled to complete it in two and a half years. The plant plans to produce up to 115,000 cars.

Peugeot Citroen will become France's second carmaker after Renault to start production in Russia.

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