Volkswagen will sign an agreement with the Russian economics ministry to open a new car-making plant in Kaluga, just south west of Moscow, on Monday.

VW was previously considering plants in Yaroslavl, Kaluga, Moscow and Vladimir.

"The agreement will lay down imports of components for industrial car assembly at preferential customs duties in accordance with a government resolution on industrial production," the ministry press service said.

Production is due to start late next year and the plant will annually roll out about 115,000 Volkswagen Gol and Skoda Octavia models.