Sales of Volvo Cars rose 20.3 percent to 449,255 units last year, putting the company on track to remain profitable, the Swedish automaker said.
Best known for its expertise in safety features and traditional emphasis on station wagons, Volvo sales were lifted by continuing demand for the popular S60, V60 and XC60 models.
Volvo said retail volumes in 2011 reflected its best sales performance since 2007.
In a statement on Thursday, the automaker 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.
China market a priority
Already the company's 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.
The automaker 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 the statement on Thursday.
Sources: Reuters; David Jolley contributed to this report