Belgrade- Italian carmaker Fiat will begin in March the production of its Punto automobile in Serbian factory Zastava, Belgrade media reported.

Director of Zastava factory Zoran Radojevic said the agreement between Fiat and Zastava will be signed next week.

Radojevic didn't specify the amount of the production but said the factory, situated in central Serbian town of Kragujevac, can produce 20,000 cars per year and with "minimal investment" the capacity can be upgraded to 40,000 per year.

Serbia and Fiat signed a car-making deal last September which is expected to revive the Serbian car industry and bring almost 1 billion euros (1.3 billion dollars) in investment in Zastava car factory.

The factory, 110 kilometres south of capital Belgrade was once the heart of the former Yugoslavia's car industry and its best-known product was the infamous Yugo. (dpa)