STOCKHOLM (Reuters) -- Chinese-owned Volvo Car Corp. has negotiated a 922 million euro ($1.2 billion) loan from the China Development Bank to repay existing debt and hopes for more to help finance the investment it needs to double vehicle sales.
Volvo, which has scaled back production at its main plants in response to weakening demand in Europe, announced the loan on Thursday.
Spokesman Per-Ake Froberg said that, as a second step under the loan agreement, the firm hoped to secure credits to be used to help finance investments amounting to $11 billion, half of which will be spent on a production upgrade in Sweden.
Volvo has said it will invest $11 billion as it aims to double total sales by 2020 to 800,000 vehicles.
"We are developing an entirely new vehicle architecture that will be very important and that will of course need to be financed," he said.
Volvo, which Zhejiang Geely Holding Group bought from Ford Motor Co. in 2010, says the investment will cut costs and help sales of its cars buck the market downturn.
Recently appointed CEO Hakan Samuelsson said last week he saw no positive signals in the European market while North America was "coming back" and that China was still growing, albeit at a slower pace.
The first loan matures in 2020, the company said.
Sweden's debt office said separately that Volvo Car had paid back a loan from the European Investment Bank ahead of time following the agreement with China Development Bank.