"Fiat SpA and Sollers have now determined to pursue independent strategies to further develop their respective presence in Russia," the companies said in a joint statement.

"To this end, both parties have consequently agreed to end their current negotiations aimed at enlarging their existing Russian activities," they said.

"Both Fiat SpA and Sollers confirm their strong commitment to Russia and intend to continue expanding their respective and existing operations and activities in the region."

Fiat and Sollers signed the joint venture agreement in February last year at a ceremony in the Russian city of Naberezhnye Chelny attended by Russian Prime Minister Vladimir Putin and Fiat head Sergio Marchionne.

The venture was expected to build up to 500,000 cars per year and lead to investments of 2.4 billion euros ($3.3 billion).

A Fiat spokesman on Friday said it would still produce 500,000 cars a year in Russia but "alone," without adding further details.

The joint venture represented the first major foreign investment in Russia's car industry since the global economic crisis triggered a collapse in demand on the country's once-booming auto market.

Car sales in Russia dropped 49 percent in 2009 compared to 2008, according to the Association of European Business in Russia.

The deal was also in line with Fiat's push to increase its presence in emerging markets by forging alliances with local automakers.