Russian car maker Sollers dropped a joint venture plan with Fiat last week in favor of Ford Motor Co instead as the US automaker tries to boost its presence in Russia's booming market.
Fiat's memorandum of understanding "foresees the creation of production capacity up to 300,000 vehicles a year, in conformity with new Russian rules on industrial and auto assembly of cars in Russia", the Italian carmaker said in a statement.
Fiat plans to produce medium to large saloons in the C and D segments, sports utility vehicles and light commercial vehicles using its Fiat brand and the Jeep brand of US automaker Chrysler, in which Fiat owns 25 percent.
The Russian plan includes a commitment to expand and strengthen its dealer network, Fiat said. Foreign carmakers have until the end of the month to sign deals with local Russian manufacturers to qualify for reduced customs duties on parts.
Western manufacturers are in talks about ventures with Russian players to take advantage of market growth and to get incentives for local production. Fiat shares closed up 1.27 percent at 6.78 euros. The STOXX Europe auto sector index was up 2.77 percent.
