GOTHENBURG (Bloomberg) — Zhejiang Geely Holding Co. agreed to buy Volvo Cars from Ford Motor Co. for $1.8 billion in the biggest overseas acquisition by a Chinese automaker.

Geely will pay $200 million using a note and the remainder in cash, chief financial officer Lewis Booth said yesterday at a press conference with Geely in Gothenburg, Sweden. The companies aim to complete the deal in the third quarter, from an initially projected second quarter, with Geely chairman Li Shufu citing the time needed to clear regulatory approval in different jurisdictions for a "complex" transaction.

Booming auto sales in China made the nation the largest car market last year, generating profit that's allowing its manufacturers to reach out to Western markets and technologies. After the 2007 sale of Aston Martin and of Jaguar and Land Rover brands to Tata Motors Ltd. for $2.4 billion the following year, divesting Volvo completes Ford chief executive officer Alan Mulally's strategy of exiting European luxury lines to focus on its namesake brand.

"This could set the benchmark for more Chinese deals to come," said Rebecca Lindland, an auto analyst at IHS Global Insight of Lexington, Massachusetts. "It potentially could allow Geely to come into the West with its own brand of vehicles."

Today's agreement includes terms on intellectual property rights, supply as well as research and development arrangements, the Chinese company said. Geely will use Volvo to tap China's growing car market, Li told the press conference.

"I see Volvo as a tiger: it belongs to the forest and shouldn't be contained in the zoo," Li said. "The heart of the tiger is in Sweden and Belgium," he said, referring to the two countries where Volvo has its main plants. "Its paws should extend all across the world."

The Swedish company plans to produce 390,000 cars this year, compared with 330,000 in 2009, Volvo CEO Stephen Odell said at the briefing. Geely will restore profitability to Volvo, Ford's Booth said.

After the sale, Ford will continue to supply Volvo powertrains, stampings and some vehicle components. Ford agreed to provide engineering and technology support, and access to tooling for common components for an unspecified period.

The Swedish carmaker's S40 model is built on the mechanical foundation of the Ford Focus now sold in Europe. Volvo supplies diesel engines for Ford's European line-up.

Geely first approached Dearborn, Michigan-based Ford about buying Volvo in mid-2008, two people familiar with the talks have said. Ford named Geely its "preferred bidder" in October 2009 and said on December 23 that they had agreed on the major terms of the transaction.

The European Investment Bank approved a 200 million-euro loan to Volvo last year, pending Swedish guarantee for the credit. Sweden later put on hold that process, citing Volvo's uncertain ownership. Industry Minister Maud Olofsson said in an interview yesterday that the government is willing to revisit the loan. Geely hasn't decided whether it will apply for the credit, Li said separately.

Li, Geely's founder, has said he is seeking to have half the company's sales from overseas markets by 2015. He aims to sell 200,000 Volvos a year in China, up from 22,405 last year, and has been seeking locations for a new plant there.

Sales-tax cuts for smaller vehicles combined with rural subsidies boosted nationwide auto sales in China 46 percent last year to 13.6 million, helping it supplant the US as the world's largest auto market.

Volvo sold 334,808 cars worldwide last year, a decline of 11 percent from 2008 and 27 percent from a peak of about 460,000 in 2007, according to the company.