updated 4/26/2005 1:54:56 PM ET 2005-04-26T17:54:56

Toyota Motor Corp. said Tuesday it will build a car assembly plant near St. Petersburg, looking to capture growing demands by Russian consumers for cars.

The new plant, located in the town of Shushary, will start operations in December 2007 and produce about 50,000 automobiles a year, mainly Camrys, said Tokuichi Uranishi, Toyota's senior managing director for Europe and Africa operations.

"Showing other companies the real success of Toyota, we hope to create a favorable climate for increased investment in the Russian economy, which will lead to Russia's economic growth, expansion of the automobile market and development of the auto industry in Russia," Uranishi said.

The carmaker announced its plans after reaching a basic agreement with the Russian government and the city of St. Petersburg. Toyota said its initial investments in the plant would total $144 million.

The European Bank for Reconstruction and Development will make an additional investment in the plant, which represents the largest investment yet in the St. Petersburg region, said German Gref, Russia's minister for economic development and trade.

"Toyota's decision was undoubtedly a significant event for the Russian economy ... and a sign that an attractive investment climate is developing in Russia," said Gref, who signed the agreement along with St. Petersburg Governor Valentina Matviyenko.

The EBRD said in a statement that it would acquire a maximum 20 percent stake.

Toyota sold 47,000 cars in Russia last year, and sales had increased by 30 percent so far in 2005, Uranishi said.

The plant will initially produce Camrys, one of the company's two best sellers in Russia. No decision has been made on what additional models will be assembled, Uranishi said.

Russia has about 157 cars per 1,000 people, the EBRD said, putting it on par with Argentina, but below the Polish average of 250.

French automaker Renault SA earlier this month opened a $250 million assembly plant in Moscow, with plans to turn out 60,000 models annually of its no-frills Logan model.

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