VW said in a news release that the necessary agreements would be signed with the Russian government and Kaluga Region administration May 29 in Moscow.
"The decision [to build a plant] has a great strategic significance for the concern," VW board chairman Bernd Pischetsrieder said, adding that this gave the company the possibility to increase its share in Russia's fast growing car market.
Volkswagen said it had considered some 70 different possible construction sites in Russia and had chosen Kaluga with account for the best terms for investment.
The Russian Economic Development and Trade Ministry said Friday it would sign an agreement with Volkswagen AG Monday to open a car-making plant in Russia.
"The agreement will lay down imports of components for industrial car assembly at preferential customs duties in accordance with a government resolution on industrial production," the ministry press service said.
Semi-knocked-down production is due to start late 2007, and the plant will annually roll out about 115,000 Volkswagen Gol and Skoda Octavia models, the company announced earlier. Completely knocked down production will begin later.
Other foreign carmakers active in Russia include Ford, which currently assembles its cars in the Leningrad Region town of Vsevolozhsk, Renault in Moscow and General Motors, BMW and Kia in Kaliningrad, Russia's exclave on the Baltic Sea.
Japan's Nissan is also planning to launch production in Russia soon. Russia's SeverstalAvto has signed licensing agreements with Fiat, Ssang Yong and Isuzu. AvtoVaz and General Motors are producing the Chevrolet Niva 4WD.
