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Czech car manufacturer Skoda Auto was to start production in China, an official said.

The company's spokesman Jaroslav Cerny said that Skoda signed a deal with Shanghai Volkswagen on Monday to start producing its Octavia model in China in 2007.

Skoda Auto is owned by German manufacturer Volkswagen AG.

The strategy behind the move is to boost the Skoda brand on the Chinese market, which currently sells around 2,000 cars annually there.

"That is nothing on the Chinese market," Cerny said. "We need to expand our presence."

The company is planning to produce some 40,000 vehicles in the Shanghai plant in 2007 and hopes to increase the annual production to about 80,000 cars in the following years.

"Further production will depend on how the market develops there," Cerny said.

"At the beginning, the cars will go to the Chinese market, but we hope we could later export them also to the neighboring countries," he said.

Skoda Auto is the country's largest and most profitable exporter. It sold 451,675 cars of its three models, Fabia, Octavia and Superb, in some 90 countries in 2004. Apart from its three plants in the Czech Republic, the company also has plants in Ukraine and India.

The Indian plant produces around 10,000 cars annually, comprising both the Octavia and the Superb sedan model.