SHANGHAI, (Reuters) - China's Zhejiang Geely Holding Group will not bid for a majority stake in Fisker Automotive Inc. mainly due to the troubled U.S. electric car maker's obligations to the U.S. government, according to two sources familiar with the matter.

Geely, the owner of Sweden's Volvo, had been favoured to win the deal for the cash-strapped Anaheim, California-based plug-in hybrid maker, which had hoped to finalise the sale by mid-March.

The Chinese firm was mainly put off by the conditions the U.S. Department of Energy (DOE) had placed on Fisker when granting a $529 million loan, which the sources said included an obligation to restore capacity and jobs at the firm's Delaware plant according to a schedule imposed by the U.S. government.

"Those obligations are too complicated to handle and seem too risky," one of the sources said. "The plan's footprint was too big. It would take a long, long time to fill up the plant with products and restore employment there."

The sources declined to be identified because of the confidential nature of the deal. Geely did not immediately respond to a request for comment. Fisker was not available outside U.S. regular business hours.

The decision was not related to last week's resignation of Fisker's founder and executive chairman, the sources said. Henrik Fisker quit over what he called major disagreements with the automaker's top executives over business strategy.

DONGFENG MOTOR IN THE BIDDING

Geely was interested in Fisker partly due to the Delaware factory previously owned by General Motors Co. The Chinese firm was keen on the plant as it wants to boost demand for its Volvo cars in the United States and is interested in producing Volvo cars there.

Fisker has not produced a car since July and is seeking a financial backer to help build its second model, the Atlantic plug-in hybrid.

Dongfeng Motor Group Co. was competing for the Fisker stake with Geely, and the sources said the Chinese state-owned company had submitted its final offer late last week.

Dongfeng Motor was not immediately available to comment and it was not immediately clear whether Fisker would automatically pick the company as the winner.

Any merger deal that Fisker undertakes must be approved by the DOE, according to the 2009 loan's conditions.

Any deal is likely to involve another Chinese company, Wanxiang Group, an auto parts maker that purchased bankrupt U.S. lithium-ion battery maker A123 Systems, Fisker's primary battery supplier. A Wanxiang executive declined to comment.