French carmaker Peugeot Citroen and Japan's Mitsubishi Motors laid the foundation stone for a 470-million-euro ($A770.94 million) plant to produce sports utility vehicles and mid-range cars for the Russian market by 2010, Interfax news agency reported.
The factory in Kaluga, 180 kilometres southwest of Moscow, plans to manufacture 160,000 vehicles per year, but annual capacity could be boosted to 300,000 to supply Europe's fastest growing market for cars, the two companies said in a statement.
The Kaluga factory is expected to employ 3,000 people.
Peugeot, Europe's second-largest carmaker after Germany's Volkswagen, holds a 70 per cent stake to Mitsubishi's 30 per cent in the joint project.
On May 19, Peugeot head Christian Streiff said the company's investment in the project totalled between 300-350 million euros ($A491-$A573.35 million).