HONG KONG - Demand booming at world's largest car market.

• Geely to build Volvo plant in China
• Volvo enters a new era under Chinese flag

Chinese automaker Geely said Wednesday that its first-half sales soared on the back of booming demand in the world's largest car market.

Geely's parent Zhejiang Geely Holding earlier this month paid 1.5 billion US dollars for Volvo, less than a quarter of what US auto giant Ford dished out for the Swedish company in 1999.

The deal was expected to help the ambitious Chinese company, a brand known for its safety and sturdiness, build up its position among Chinese carmakers.

Geely's sales rose 55 percent to 9.24 billion yuan (1.36 billion US dollars) from 5.95 billion yuan in the first half of 2009, it said.

The company said it booked a profit of 804.8 million yuan, up 35 percent from 595.9 million yuan in the year-earlier period.

"The Group’s overall performance in the first half of 2010 was very encouraging, helped by the strong demand for sedans in the China market," Geely said in a statement to the Hong Kong stock exchange.

The company's shares were down 0.38 percent to 2.60 Hong Kong dollars (33 US cents) in afternoon trading.

Beijing's tax breaks on small car sales and subsidies for energy-saving vehicles would help boost demand, Geely said.

Geely said it sold 195,734 vehicles in the first half of the year, 42 percent higher than the same period last year.

The automaker also said it had struck a deal with Internet retailer Alibaba.com to start selling its sedans online next year.

Despite the rosy results, the carmaker warned that it expects "competition in both the domestic and export market would continue to intensify and that the group could face more challenges in the remainder of the year."