UPDATE 1-VW says Q3 very good, sees long-term Russia growth

* Sees German market falling sharply next year

* VW CEO says Russian auto market rising 30 percent by 2018

GRABTSEVO, RUSSIA, Oct 20 - Volkswagen AG had a "very good" third quarter and sees the struggling Russian car market rising in the long term, but Germany will be hit hard by the end of scrapping schemes, senior executives said on Tuesday.

VW's sales chief Detlef Wittig told reporters at an event in Russia he expected Germany's overall car sales to fall below 3.0 million units in 2010 from 3.7 million this year.

But the firm was very positive about its sales in the third quarter of 2009, he said.

"We will be stable this year in terms of unit sales. This is better than what we have expected. Third quarter was very good," he said.

Wittig was philosophical about the end of a highly successful scrapping incentive scheme in Germany: "We have plenty of time for adjustment," he said.

He added that Volkswagen needed to digest its deal with Porsche before considering other acquisitions.

Volkswagen is due to report third quarter results on Oct. 29. Daimler -- whose units include luxury car brand Mercedes-Benz -- on Monday reported forecast-beating third quarter earnings and a growing cash cushion, sending its shares soaring.

RUSSIA TO GROW

The Russian car market, which halved this year because of the financial crisis, will rise as much as 30 percent from its peak 2008 levels by 2018, Volkswagen's chief executive Martin Winterkorn said.

He told reporters he saw sales of some 3.6 million in Russia annually by that time.

Russia's auto market had been tipped to overtake Germany as Europe's biggest before the crisis hit and crushed demand for new cars as credit evaporated.

VW plans to launch a new budget model in Russia in 2010 and more than double local production betting, on rising demand for cheap cars, another executive said on Tuesday.

Vladimir Shults, head of VW's Russian development unit, told reporters the car maker hoped to assemble 150,000 units in Russia next year, up from 63,000 last year and the same 63,000 units expected this year.

"We hope we won't drop this year," he told reporters as Volkswagen was preparing to launch a so-called complete knock-down cycle at its plant in Grabtzevo some 170 km west of Moscow. Under the plan cars will be painted and welded locally instead of simply being assembled at the plant.

Russia's powerful Prime Minister Vladimir Putin, who has repeatedly called on global car makers to build full cycle prroduction in Russia to help the country modernise its economy, is expected to attend the opening on Tuesday.

Shults said the firm would be producing five models next year including the Skoda Octavia, the Skoda Fabia, the Volkswagen Passat, the Volkswagen Tiguan and the new model based on the Volkswagen Polo, which has yet to be given a name.

It will cost around 440,000 roubles ($14,990), directly competing with the likes of Ford Focus in the most popular Russian price segment.

Russian car sales halved in the first nine months of this year but Volkswagen saw its sales falling only 14 percent and those of Skoda declining by 31 percent (Reporting by Gleb Bryanski and Gleb Stolyarov, Writing by Dmitry Zhdannikov and Helen Massy-Beresford; Editing by Hans Peters)