HispanicBusiness

German carmaker Volkswagen on Tuesday began construction of a 250-million-euro (325-million-dollar) engine factory outside Moscow to cater to the growing Russian market.

Speaking at a groundbreaking ceremony, Russian Prime Minister Dmitry Medvedev called the move a "clever investment," the Interfax Agency reported.

Volkswagen wants to start producing 150,000 engines a year in the 30,000-square-metre plant as of 2015.

"It is necessary to introduce such modern technology in Russia," Medvedev said in a tour of the auto factory Volkswagen has had in Russia since 2007.

The new VW factory is being built in the Moscow suburb of Kaluga, near the existing VW facility.

The Medvedev regime has long pressed for modernisation of his country's backward auto industry.

Auto sales are currently booming in Russia, with 2.75 million cars sold in 2012, a 13-per cent over the previous year. Volkswagen says it has sold about 38 per cent more cars in Russia in the past year.