UPDATE 1-VW seals Indonesia assembly deal, eyes expansion

* Volkswagen to team up with Indomobil Group

* To assemble several hundred Tourans this year

* Full-scale manufacturing conceivable in 2012

FRANKFURT, May 11 (Reuters) - Volkswagen (VOWG.DE), Europe's largest carmaker, took a first step in its South East Asia expansion strategy with a deal to assemble Tourans compact minivans in Indonesia this year.

VW is teaming up with Indomobil Group, the country's largest auto company and parent to Volkswagen's exclusive Indonesian distributor PT Garuda Mataram Motor.

Capacity initially would be several hundred Tourans and would gradually increase, VW said in a statement on Monday, adding that full-scale manufacturing could conceivably begin in 2012.

The Indonesian plant would take in pre-finished vehicles and carry out final assembly.

Shipping incomplete models for assembly elsewhere is a favoured method to supply markets with high import duties and, depending on the extent of the operation, can require roughly a tenth of the investment of a normal production site.

VW already sells the Tiguan compact SUV, the larger Touareg and the Golf GTI performance hatchback in Indonesia.

Over 500,000 new cars were sold in Indonesia last year, up from about 435,000 in 2007.

"The plans envisage expanding market share in the ASEAN region beyond Indonesia, thus establishing Volkswagen throughout the region. It is intended to broaden the product offering to include further vehicles from the Volkswagen, Skoda, Audi and Volkswagen Commercial Vehicles brands," VW said.

Volkswagen is keen to expand in South-east Asia, which it says offers "enormous" growth opportunities, but failed to clinch a deal with Malaysia's Proton (PROT.KL) after repeated negotiations.

(Reporting by Christiaan Hetzner; Editing by David Cowell)