MOSCOW - Volkswagen AG could be the next big automaker to set up assembly operations in Russia.
Meanwhile, other carmakers are pouring into the country.
'We want to do all we can to co-operate with foreign carmakers, as we have already demonstrated with Ford, GM, Fiat, Renault and now Volkswagen,' said Sergei Mitin, Russia's Deputy Minister for the Economy at the Moscow auto show.
Now VW sounds interested.
'We are having talks with the Russian government but we would be looking for a number of incentives and help with such things as tax breaks, communications and logistics,' said VW's regional director Klaus Jebe.
'We have nowhere in particular in mind, but we would be looking to produce a small-to-mid-range vehicle for this market,' he said.
Jebe would not say whether Volkswagen would produce VW or Skoda vehicles. 'It is too early to discuss this,' he said. Skoda has said it wants to build cars in Russia.
Automakers are showing growing interest in the Russian market, despite the economic climate which has seen the ruble tumble from 7 to the US dollar to 25 in a year.
Ford Motor Co. is pushing ahead with a $150 million investment to build the Focus near St Petersburg starting in 2001.
'There are always good reasons not to be here, but you have to look at the country's potential,' said Alain Batty, president of Ford of Russia.
Batty said the St Petersburg plant will include body, paint and final assembly shops and would produce 25,000 vehicles a year by 2001 with potential to produce 100,000.
Ford Credit is also being established in Russia to help support the Focus manufacturing operation in St Petersburg.
BMW recently invested $7 million in a small plant in Kaliningrad which will produce around 1,000 vehicles this year - 5 series sedans and Land Rover Defenders.
Renault is also counting heavily on Russia. It already has a joint venture in Moscow with Moskvich to assemble the Megane. Last month it announced that it would start to build trucks at Moscow's ZiL plant.