Volvo's new Chinese chairman wants to take the Swedish car brand upmarket and compete directly with BMW and Mercedes-Benz by building a large luxury saloon.

Zhejiang Geely Holding Group yesterday closed its purchase of Volvo from Ford Motor for $1.5bn in the biggest overseas acquisition yet by a Chinese company of an overseas carmaker. Li Shufu, chairman of Volvo and co-chair of Geely, said: “At the moment we are competing with BMW, Audi and Mercedes, but we don't have a product to compete with the BMW 7-Series and Mercedes S-Class. We need to fill that gap”.

In the decade that Ford owned Volvo, it kept the brand from developing large luxury saloons – one of the industry's most profitable segments, and popular in China – partly in order to avoid cannibalising sales of Jaguar, the UK brand it sold to India's Tata Motors alongside Land Rover for $2.3bn in 2008.