--- a/mercurial/localrepo.py
+++ b/mercurial/localrepo.py
@@ -74,6 +74,8 @@ class localrepository(object):
         self.transhandle = None
 
         if create:
+	    if not os.path.exists(path):
+		os.mkdir(path)
             os.mkdir(self.path)
             os.mkdir(self.join("data"))