Its plans for a new factory come as Russia’s vehicles markets are booming. This year its car market is expected to overtake Germany’s to become the biggest in Europe. Russia has already overtaken Germany for sales in the first half of the year after growing more than 40 per cent compared with the first six months of last year. Russia is also Europe’s biggest truck market.

PricewaterhouseCoopers has forecast that the country could double its domestic car production over the next eight years to 3.2 million units. Car sales are soaring on the back of the growing economy and rising incomes. By contrast, sales in many parts of Western Europe are falling because of the impact of the global credit squeeze and the high cost of fuel.

GM, which went into the Russian market in 1992, already has joint ventures with Avtovaz, Gaz’s rival, and with Avtotor and is building a new factory near St Petersburg. Ford, Renault and Toyota all manufacture in Russia with other brands such as Peugeot and Fiat planning to do so.

Leonid Dolgov, head of Gaz’s car operation, said the factory would produce about 300,000 cars a year. Gaz intends to compete directly with Renault, which produces the Logan in Russia. Gaz wants to price new small saloons in the $12,000 to $20,000 range to compete with the Logan and wants to complete a deal by the year end.

Yesterday Daimler, the world’s biggest commercial vehicle manufacturer, said that it wanted to buy a 42 per cent stake in Kamaz, Russia’s biggest truckmaker. Daimler also wants to build a new factory making its own trucks in Russia.

The German company said: “Along with the option of building a new factory for local assembly of Daimler trucks, the division is also studying the possibility of acquiring a stake in Kamaz that would enable the two companies to combine their development, production, and sales expertise.”

It is thought that Daimler could make a binding offer by October for Kamaz, whose market capitalisation is nearly $4 billion. Daimler said it would decide by the end of the year.

— Honda cut its sales forecasts despite first-quarter profits rising 8 per cent to 179.61 billion yen (£836 million) on strong Chinese sales. The Japanese car-maker cut its sales forecast in North America for this business year by 1.4 per cent to 1.74 million cars and world sales target by the same to 4.08 million cars.

The Volt will be powered by electricity stored in a lithium-ion battery pack that runs the length of the car. After charging for several hours, the car will be able to run about 40 miles without using gasoline, CNN reported.

“The Volt symbolizes GM’s commitment to the future,” said Rick Wagoner, the company’s chairman and chief executive officer.

The car will have the equivalent of about 150 horsepower and a top speed of 100 mph, the Detroit automaker said. The car’s expected price was not revealed, CNN said.

The car’s zero-to-60 mph time will be under nine seconds, said GM vehicle line director Tony Posawatz.

“The center of gravity of the car, with the center battery pack, it’s going to have real great ride and handling,” Posawatz was quoted as saying.

GM said the car will cost “less than purchasing a cup of your favorite coffee” to recharge, and use less electricity annually than a refrigerator.

Some characteristics of the Volt:
–Lithium-ion batteries, which are still under development, are expected to propel the car up to 40 miles on a single charge from a home outlet.

–As it approaches 40 miles, a small internal combustion engine kicks in to recharge the batteries, extending the car’s range to hundreds of miles. The engine can run on gasoline or E85 ethanol.

–Design is among the most aerodynamic in GM history, although the company won’t reveal its drag coefficient.

–Interior has a liquid-crystal instrument display that the driver can configure to his or her needs, as well as touch-screen climate, information and entertainment controls.

–It takes about eight hours to recharge through a 120-volt outlet, costing about 80 cents a day assuming a price of 10 cents per kilowatt-hour.

–Top speed is 100 mph.

–Due in showrooms in November 2010.