ST. PETERSBURG, Russia (Bloomberg) -- Fiat has agreed to build a factory in Russia to build Jeep models, according to sources.
Fiat will finalize the deal for the factory, which will be located near St. Petersburg, by the end of the year, said three people familiar with the matter. They asked not to be identified because the discussions are private.
Earlier this month Russian authorities had expressed concern that Fiat may delay plans to invest 850 million euros ($1 billion) in a factory because the sales slump in Europe has freed up capacity that could be exported to Russia.
On Saturday, Fiat-Chrysler CEO Sergio Marchionne said: "We are working to close the deal. I'm really interested in Russian expansion."
The St. Petersburg plant would build 120,000 vehicles a year and is expected to start production in 2014.
Russia's auto market is growing rapidly with vehicles sales expected to rise 7.5 percent to 2.85 million this year, according to the Moscow-based Association for European Businesses.
Int he first nine months, Russian sales of Jeep models more than doubled to 3,455 vehicles, while demand for the Fiat brand plunged 72 percent to 6,263 cars.
Western automakers including General Motors, Ford Motor and Renault are investing heavily in Russia to take advantage of a market that is expected to become bigger than Germany's some time this decade.