Wolfsburg, Germany - Volkswagen said Monday it was setting up a car-assembly plant in Indonesia as a first step to establishing its brand in the south-east Asian nations.

The factory will operate in cooperation with an Indonesian partner company, Indomobil, in the capital city Jakarta.

Assembly of locally-built Volkswagen cars from kitsets for the Indonesian automobile market will commence this year.

The initial production capacity from summer 2009 will be several hundred Touran cars. The Touran is a small family van.

The German group said at its head office in Wolfsburg it intended to broaden the product range later to include other Volkswagen models and Skoda and Audi cars as well as Volkswagen commercial vehicles.

In 2007, Volkswagen called off negotiations with Malaysian car manufacturer Proton which could have led to Volkswagens being assembled in Malaysia. In 2008, before the recession set in, Volkswagen disclosed it considering setting up a plant in Thailand. (dpa)