Volvo Cars, the Swedish automaker bought by an ambitious Chinese rival, said on Thursday that vehicle sales rose by a fifth last year, putting it on track to remain profitable and making it the fastest growing luxury carmaker.

Best known for its expertise in safety features and traditional emphasis on station wagons like the Volvo V50, Volvo said retail volumes rose 20.3 per cent to 449,255 vehicles, its best sales performance since 2007.

Volvo gave no updated earnings figure, however, reaffirming only that it aimed to post a profit after making 477 million Swedish crowns ($69 million) in the first nine months.

Chinese businessman Li Shufu and his Zhejiang Geely Holding Group Co, which controls Chinese Geely Automobile, bought the brand from Ford in August 2010 in a deal that valued the carmaker at $1.8 billion.

Already its third largest market behind the United States and Sweden, China has become a key priority for Volvo.

In order to meet its goal of about 200,000 vehicle sales in China by 2015, Volvo is building a new manufacturing plant in Chengdu to complement its two main European factories in Sweden and Belgium.

It is also looking into setting up a second vehicle plant there as well as an engine plant to boost local content to meet expected demand.

"The growth plan for the Chinese market is vital to the year 2020 global sales target of 800,000 sales, and the expansion in China is progressing with the establishment of new facilities including local manufacturing," the company said in a statement on Thursday.

Earlier on Thursday, Daimler said its Mercedes-Benz luxury brand posted an 8 percent increase in sales to over 1.26 million vehicles in 2011, thanks in part to delivering almost 200,000 cars to Chinese customers. – Reuters