MG Rover is expanding its dealer network at home and abroad and seeking to push its Rover brand upmarket to try to reverse a sharp fall in sales.

The group admitted yesterday that it would sell fewer than 120,000 cars this year - down from 144,000 in 2003 - and that its dealers would be forced to respond "aggressively" to sell off existing Rover stocks ahead of the arrival of higher-specification models it plans to bring in next year.

Rod Ramsay, MG Rover's managing director of sales and marketing, said of the figures: "It's not a result I want to see repeated. We are determined to increase sales in 2005."

Mr Ramsay said the loss-making car company's plans for a joint venture with Shanghai Automotive Industry Corporation, which would reportedly see the Chinese group put up £1bn for a 70% holding, were "on track".

He said the group expected the full deal to be signed early next year, and that contracts had already been signed in relation to the development of a new medium car - to be launched in 2006 - and "another product which I'm not prepared to specify".

MG Rover detailed its plans to improve on this year's sales performance which, in terms of units, could be rated as among the worst in its history.

Comparison is complicated by the changing composition of the group, such as the sale of Land Rover and BMW's decision to retain the Mini brand when it sold MG Rover. In 1994, the then Rover group, including Land Rover and Mini, sold 245,000 cars in the UK alone.

A key strand in the plan to rebuild sales is an expansion of the dealer network both in Britain and the rest of Europe. Mr Ramsay said MG Rover had recruited 70 new dealers in mainland Europe in the past 15 months, and hoped to add another 100 over the coming year, as the end of the "block exemption scheme" allows dealers to take on cars from more than one manufacturer. In the UK, it is hoping to boost its dealer network by about 30 in the coming year, which would take it close to 300.

The group is looking to put more individual emphasis on its two brands. It will improve the specifications of its Rover models in an attempt to position it at the lower end of the premium market, rather than in the mass market segment. Improvements will include greater emphasis on comfort and more use of wood and leather in interiors.

MG Rover's executives acknowledge that the group and its dealers will face a problem in selling existing stocks of cars which do not have the enhanced specifications. Last month, the group said it was cutting production by eight days in the run-up to Christmas to "rebalance" stocks, but has refused to comment on how many cars are involved.

Yesterday, Robert Hazelwood, the UK sales and marketing chief, said: "Our dealers will remain very tactically aggressive. There will be good bargains for the UK public."

Although dealers would have to cut prices or be more generous on trade-in deals, he said MG Rover and the dealers would still make a profit.