AvtoVAZ, Russia's largest carmaker, and Canadian auto parts maker Magna International signed a memorandum of intent today to jointly develop a new budget model and build a plant.
The project will require investment of around $2.0 billion (1.5 billion euros), AvtoVAZ Chairman Vladimir Artyakov told President Vladimir Putin during the signing ceremony in the Volga River town of Tolyatti, the home of Russia's car industry.
"It will be a car based on new components and new technologies, and we hope that the price for the basic model will be less than $12,000," Artyakov said.
"The parties agreed to set up modern design and development processes and produce sedan, estate and hatchback models at a new car assembly plant," he added.
AvtoVAZ, already in a joint venture with General Motors, had also named French carmakers Renault SA and PSA/Peugeot-Citroen among its potential partners.
Earlier this month, Magna secured a $1.54 billion investment from a firm controlled by Russian billionaire Oleg Deripaska, an owner of aluminum giant RUSAL and Russia's second-largest automaker Gaz.