SHANGHAI AUTOMOTIVE, the car group whose withdrawal from joint-venture talks this month triggered the collapse of MG Rover, plans to bid for the assets of Powertrain, the British group’s engine plant.

The Chinese car company is also understood to be scouting for sites in eastern Europe where it could build Rover cars for sale in Europe.

Powertrain, which made engines for Rover, Land Rover, and a clutch of small car companies and employed 1,200 people, was put into administration along with MG Rover this month. Industry executives in Shanghai said yesterday that of all the assets left within MG Rover, the Powertrain production lines were of most interest to SAIC. The company itself said it had had no contact with MG Rover’s administrators, but senior sources close to the group confirmed its interest in Powertrain.

Thanks to a £67m technology-transfer deal with MG Rover last year, SAIC already owns the intellectual property behind two Rover models, the 75 and 25, and the rights to K-series engines made by Powertrain. A motor-industry source in Shanghai said that while SAIC could, with some effort, reproduce the car-production lines in China, building a new engine plant to make the K-series would take two years and cost as much as £500m. SAIC is also thought to be eager to use the K-series engines in 4x4s to be provided by Ssangyong, the South Korean car group it acquired control of last year.

Industry experts expect SAIC eventually to start building Rover cars in China.

An SAIC spokeswoman in Shanghai confirmed to The Sunday Times that the company had written to MG Rover’s British suppliers asking for prices and to gauge their ability to continue supplying components. But the company had not yet made a firm decision on building the cars. She said: “We will look at all possibilities to realise the potential of the assets we have acquired.”

SAIC has a 300-strong team — until recently supplemented by 40 MG Rover engineers — working on the project.

Last week MG Rover’s administrators said they would examine the terms of last year’s technology-transfer deal to find out if it could be challenged. The SAIC spokeswoman said the company was confident it was watertight.

The Chinese group had been advised by American law firm Baker & McKenzie. The deal was done under Singaporean law because both sides had wanted a third-party jurisdiction in case of a dispute. The £67m had been paid “to support Rover’s financial position, and to show good faith in the talks”.

Executives at the Shanghai Motor Show yesterday said that as well as building Rovers in China, SAIC was examining potential production in eastern Europe.

Meanwhile the Iranian state-owned car maker Saipa yesterday told a French news agency that it was not interested in buying up MG Rover, despite reports to the contrary.

Managing director Ahmad Ghalebani said: “We were contacted by Rover a month ago. But because of the undetermined situation of the company, we are not intending to purchase it.”