A deal could be announced as soon as the Shanghai motor show, which takes place in the middle of April. If the sale goes ahead, it would fit both Smart's future vision for itself and Geely's acquisitive streak.
Smart has committed itself to being an electric-only car maker from 2020. While Europe is using a mixture of consumer incentives and emissions regulation to increase the take up of EVs, China has aggressively incentivised electric vehicles in order to tackle its serious air pollution problem.
A recent report in Handelsblatt stated Daimler would decide the fate of its city car brand by the end of 2019, with incoming CEO Ola Kallenius understood to be less enamoured with the marque than his predecessor, Dieter Zetsche.
The brand, which focuses on small city cars, has struggled to make money since it began producing cars in 1997. Industry analyst Evercore ISI estimates it could be losing up to €700 million ($1.1 billion) per year.
Last year, Geely's chairman, Li Shufu, bought a 9.7 per cent stake in Daimler, making him the largest single shareholder in the company.