Tokyo, 20 May 2008: Japan's Mitsubishi Motors Corp and France's PSA Peugeot Citroen said on Monday that they will set up a joint venture in Russia to produce cars for the three brands starting in 2011.

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The factory in Kaluga, 180 Km southwest of Moscow, will produce midrange SUVs for the Mitsubishi, Peugeot and Citroen brands, as well as midsize Peugeot and Citroen vehicles, with an overall capacity of 160,000 vehicles.

Production is due to start in 2011, the companies said in a joint statement.

The two automakers had separate deals with Moscow granting them financial incentives to assemble cars in the country, and had said they were open to joining hands with undisclosed partners.

Peugeot Citroen, Europe's second-biggest automaker, said that it would invest between 300 million euros and 350 million euros in the proposed JV.

"Our investment will be between 300 million euros and 350 million euros," Chief Executive Christian Streiff said at a press conference after PSA Peugeot Citroen and Mitsubishi said they would set up a joint venture in Russia to produce cars for the three brands starting in 2011.

Peugeot Citroen will own a majority stake, a Mitsubishi Motors spokesman said.

He said the partners would provide further details such as ownership ratios and Mitsubishi's share of the investment at a later date, most likely at the plant's ground-breaking ceremony scheduled for June 10.

The two automakers already have an operational tie-up under which Mitsubishi Motors build 4x4 vehicles such as the C-Crosser and Peugeot 4007.

Russia is expected to outstrip Germany as Europe's biggest car market in a few years and has become a priority growth area for many global automakers.

Mitsubishi Motors sold 107,000 Outlander SUVs, Lancer sedans and other cars in Russia in the business year ended on March 31, and is targeting a 31% to 140,000 cars this year.

Peugeot Citroen wants to sell 100,000 cars in Russia by 2010.