Shanghai Automotive Industry Corp, China's largest passenger car maker, plans to buy MG Rover as its first Western beachhead, sources in England and China have told trade newspaper Automotive News Europe.

The paper said SAIC would boost its ambitions to become the world's sixth-largest automaker by taking an initial equity stake in MG Rover, though the size of that stake is still under discussion, nonetheless an MG Rover source reportedly said the shareholding would increase over time.

MG Rover reportedly said current talks only involve the technology cooperation pact signed in June but sources in China and at MG Rover in Longbridge, England, told the paper SAIC would like to own MG Rover outright and will take control of the British automaker in the long term.

"SAIC will buy MG Rover," a source in China who is involved in the discussions, told Automotive News Europe, adding: "When the announcement is made depends on the progress of the negotiations, hopefully in a few months."

An MG Rover source reportedly confirmed there is a longer-term plan for the takeover, though terms and details have not been ironed out.

The transaction would be in steps and it could be several years before SAIC would own all of MG Rover, Automotive News Europe said.

"There is an absolute and definite plan which seems to start with some kind of joint deal," the MG Rover source reportedly said. "I think over the course of months it becomes more and more Shanghai and less and less Longbridge. Two or three years from now I would imagine SAIC to have the vast majority of the company. The relationship is good."

The paper said the deal would give MG Rover engineers the finances to produce the crucial replacement for the Rover 45 lower-medium car, which has been delayed often.

The MG Rover source told the paper that, under the developing agreement, hatchback versions of the Rover 45 could be produced in Longbridge and sedans in China, where there is almost no market for hatches.

"What they don't plan to do is take all the production and stick it in China," the MG Rover source reportedly said.

The Chinese reportedly would move the Rover brand upmarket in China and also see MG Rover's 1,247 western dealers as a point of entry into Europe.

SAIC is already the main Chinese partner for Volkswagen and General Motors, Automotive News Europe noted.

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