Volvo Car, the Swedish unit of Ford Motor Co, said it expects to lead Ford's Premium Automotive Group (PAG) in the Chinese market but is not in haste to produce locally.

Volvo will act as an "engine" for PAG and will pave the way for its other brands' sales in China, said Ong Eng Seong, president of PAG's China operations.

Besides Volvo, PAG includes British brands Jaguar, Land Rover and Aston Martin.

"All of these brands will be marketed in China through the networks being built by Volvo," Ong said.

Volvo, Land Rover and Jaguar have been launched in China as imports.

Aston Martin will be exported to China next year, he said.

"However, Volvo has no production plans in China so far because our sales volume in the nation remains small and we are focusing on brand image instead of volume now," Ong said in an interview with China Daily.

"We have not submitted any applications for local production to Chinese regulators," he said.

His remarks denied recent speculations that Volvo will produce its S40 sedan in China soon.

In June, Volvo's Chief Executive Officer Hans-Olov Olsson told China Daily the company will consider production in China when its sales reach 10,000 vehicles in China a year.

Volvo expects to sell 3,000 vehicles in China this year, up from 2,500 units last year, Ong said.

Volvo now sells its S80 sedans and XC90 sport utility vehicles in China.

It will start to export the newly-developed S40 T5 sedan to China at the beginning of next month, he said.

"Our sales in China will grow rapidly next year with the introduction of the S40 T5," he said.

The 2.5-litre S40 T5 will go head-to-head with the BMW 3 Series and Mercedes-Benz C Class sedans.

BMW started to produce 3 and 5 Series sedans in a joint venture with China Brilliance Auto in northeast China's Liaoning Province in late 2003.

Mercedes-Benz will make C and E Class sedans in its parent DaimlerChrysler's joint venture with Beijing Automotive Holding Corp from next July.

"Prices of imported premium cars are likely to rise, not decline, next year thanks to a increasingly strong euro and mounting raw material prices, although China will continue to cut its tariffs on vehicle imports," Ong said.

The euro's exchange rate against the US dollar now stands at 1:1.33, up from 1:1.22 two months ago.

The majority of China's premium car imports come from Europe.

(China Daily December 13, 2004)