Shanghai Automotive Industry (SAIC), China's largest carmaker, plans to buy MG Rover.

  Quoting sources in England and China, Automotive News Weekly said today that SAIC would boost its ambitions to become the world's sixth-largest automaker by taking an initial equity stake in MG Rover, the size of which was still under discussion.

  It said SAIC intended to take control of MG Rover in the long term.

  "SAIC will buy MG Rover," it quoted a source in China, who it said was involved in the discussions, as saying. "When the announcement is made depends on the progress of the negotiations, hopefully in a few months."

  "There is an absolute and definite plan which seems to start with some kind of joint deal," it quoted an MG Rover source as saying.

  "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."

  No comment was immediately available from either company.

  The plan envisions producing hatchback versions of the Rover 45 in Longbridge, England, and sedans in China, where there is almost no market for hatchbacks, the paper reported.

  SAIC also sees MG Rover's 1,247 western European dealers as a point of entry into Europe.

  MG Rover, an independent carmaker, has been struggling to break even after being sold four years ago by Germany's BMW for just £10.

  Britain's seventh-largest private equity group, Phoenix Venture Holdings, owns MG Rover now.

  SAIC signed a cooperation agreement with Rover in June but provided no details, saying the companies had yet to receive central government approval.

State media in China quoted sources close to Shanghai Auto as saying the company would buy a stake in Rover and start producing Rover products in China.

  Shanghai Auto is already the main Chinese partner of both General Motors and Volkswagen.

  The company aims to become one of the world's top six automakers by 2010 and has said it wants to list its stock overseas to raise a reported $2bn (£1.01bn).

  In July it agreed to buy South Korea's Ssangyong Motor, and executives have said Shanghai Auto would keep seeking overseas acquisitions and develop its own brand.