The company says it will assemble 10,000 BMW 5-series and Land Rover Defender models a year there, using pre-produced parts, panels and components.

The two models will be assembled with Russian partner Avtotor at a plant in the city of Kaliningrad, starting in the summer.

BMW also plans to set up its own distribution network in Russia. It will also be based in Kaliningrad, which is close to the Polish border.

Some 50m marks will be spent on production and 75m marks on distribution between now and 2001, creating 1,500 jobs. Two-thirds of the new jobs will be in distribution.

Growing market

Around one million new cars are currently registered in Russia a year and the market is expected to grow to around 1.5m new registrations a year by 2002, according to BMW.

The car maker, which is already represented by 17 distributors in Russia, said its own distribution network would supply components to customers, as well as selling BMW and Land Rover models.

There are an estimated 120,000 BMWs on the road in Russia.

BMW said Kaliningrad, which is in a special economic zone and offers tariff and customs benefits, was an attractive location as it was a free port and had a qualified workforce and good infrastructure.