Ford Motor Co.'s Volvo Car Corp. will begin producing its S40 sedan at Changan Ford's plant in the southwestern city of Chongqing, Chief Executive Fredrik Arp said on Monday.
Volvo was aiming to manufacture 10,000 cars a year and was working with a number of Changan Ford's local suppliers to meet the government's requirements that a certain percentage of inputs be produced in China, he said.
Volvo had originally said it would make a decision in 2005 about manufacturing in China.
"After working with Changan Ford for over a year we have ensured that their factory, cooperating with our own experts, will meet our high demands (for) Volvo quality," Arp said in a statement.
Changan Ford is a joint venture between the second-largest U.S. car maker and Changan Automobile Co. Ltd.
Volvo lags entrenched rivals such as Volkswagen A.G.'s Audi A.G., which has been making expensive cars for years for an increasingly cash-rich and style-conscious middle class in the world's third-largest vehicle market.
Volvo sold just 3,000 vehicles in China in 2004 out of 456,000 it sold worldwide.
BMW A.G. set up its China factory in 2003 and DaimlerChrysler A.G. is building a plant in Beijing that will be able to build 25,000 Mercedes-Benz cars annually.
Chinese car sales grew 15 percent in 2004, after almost doubling in 2003, and analysts expect growth of 10 percent to 15 percent this year.