MOSCOW -- German-American carmaker DaimlerChrysler plans to start assembling Mercedes models in Russia this year, the Kremlin said.
A Kremlin statement, issued late on Monday, quoted Daimler Chief Executive Juergen Schrempp as telling President Vladimir Putin the cars would be assembled in St. Petersburg -- Putin's political stronghold -- starting this autumn.
"If I had any doubts -- and I don't have them -- regarding Russia's development process, they would have definitely disappeared after this meeting," Schrempp told Putin during talks in the Kremlin.
He added he had spoken to German Chancellor Gerhard Schroeder just before meeting the Kremlin leader.
A company spokesman in Stuttgart confirmed DaimlerChrysler planned to assemble Mercedes-Benz cars in Russia's second city, but gave no financial details or concrete schedule.
Business confidence in Russia has deteriorated in the past year, partly after Moscow blocked an attempt by Germany's Siemens to buy into a Russian engineering firm.
Germany is widely seen as Russia's closest European ally and both Putin and Schroeder are keen to push trade links.
Gerhard Hilgert, head of DaimlerChrysler in Russia, was quoted by Interfax news agency as saying the company considered various options of launching car production in Russia, including construction of its own plant or partnership with a local firm.
"We are looking at options in St Petersburg and the Moscow region," he told the news agency.
Mercedes cars, a symbol for many Russians of their new-found wealth, have become almost as common on the streets of Moscow as crumbling Ladas and Volgas since the Soviet Union collapsed.
Japan's Toyota became the first major carmaker to be lured by new Russian auto industry rules, saying last month it would invest 15 billion yen ($139 million) in a plant near St. Petersburg to initially produce 20,000 Camry sedans a year.
Analysts have said rival carmakers such as Nissan could soon follow Toyota's example after Russia decided to eliminate its 12 percent import duties on car components.
Russia's overall auto market grew to nearly 1.4 million vehicles last year from 1.21 million in 2003.
Ford Motor Co. and France's Renault run plants in Russia, and others are set to follow as foreign car sales soared 80 percent in 2004 and are expected to rise 50 percent in 2005, spurred by households' rising income.