An investment arm of Goldman Sachs is in talks with Chinese car maker Geely Automotive, which has been linked with both Volvo and Opel, to buy about $250 million of the company's convertible bonds and warrants, two sources said.

The two sides have basically agreed on the investment in Geely already, but have yet to work out some technical details, one source with direct knowledge of the deal told Reuters.

Geely, China's 10th largest vehicle maker, said this month its parent was considering a bid for Ford's Swedish car brand Volvo with a local government-backed investment firm.

A successful deal would boost Geely's profile and give it access to Volvo technologies which it needs to upgrade its cars.

A source told Reuters last week that Geely's parent also had approached Canadian auto parts maker Magna International about a potential production partnership on Opel. General Motors agreed earlier this month to sell a 55 percent stake in car maker Opel to a group led by Magna.

Trade in Geely shares was suspended last week as the company said it was considering a convertible bond and warrants issue, though Geely Executive Director Lawrence Ang told Reuters the issue was not related to Volvo.

Geely would use the proceeds from a Goldman deal to boost its production capacity -- including adding 150,000 units a year in the central province of Hunan, which can now produce 50,000 units, one of the sources said.

The sources declined to be named as the talks were not yet public. Geely and Goldman officials declined to comment.

Geely had said previously it would buy three new plants from its parent, with a combined annual capacity of 165,000 units, once construction was completed.

Car sales in China, the world's largest auto market, have grown sharply this year, boosted by Beijing's policy initiatives, including sales tax cuts on small cars and subsidies for rural buyers.

Automakers from GM to Volkswagen are building new plant or setting up new China joint ventures.

Geely, which competes against Chery Automobile and other local brands, has current annual production capacity for 370,000 cars, according to data provided by a Geely representative.

The car maker, based in the eastern city of Hangzhou, had said previously it aimed to add capacity of 315,000 in phases, including taking over its parent's three facilities.

Geely's January-August car sales rose 35 percent to more than 185,000 units, equivalent to 74 percent of its full-year target, another company executive said.

(Reporting by Fang Yan and Alison Leung; Editing by Jacqueline Wong and Ian Geoghegan))

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