Paris  -  French car-maker PSA Peugeot Citroen said Monday it had signed an agreement with Japanese manufacturer Mitsubishi Motors Corporation to create a joint venture for the production of cars in Russia.

The factory will be situated at Kaluga, some 180 kilometres south-west of Moscow, and will be used to assemble Peugeot, Citroen and Mitsubishi SUVs as well as mid-range Peugeot and Citroen models for the Russian market.

Construction of the plant, which will have a capacity of 160,000 vehicles, will begin on June 10, with production slated to commence in 2011.

In 2005, the two companies began cooperating on the manufacture of four-wheel-drive vehicles for the European market.

The latest agreement "marks a deepening of relations between the two producers, for whom Russia represents a high-priority area of development," Peugeot said. (dpa)