Volvo Cars and Geely have confirmed they are investigating a merger. Currently Volvo Cars is a wholly owned subsidiary of the Chinese automaker.
In a joint statement to the press, they said the mooted merger will "accelerate financial and technological synergies between the two companies", as well as improve scale and allow them to "be a leader in the on-going transformation of the automotive industry".
Last year Geely purchased a half share in Smart, and is developing the brand's next generation electric cars, which will be built in China and sold throughout the world.
The combined automaker will initially be listed on the Hong Kong stock exchange, although the companies say they plan to also list in Stockholm, Sweden.
It's not clear at this who will run the combined entity, or how board seats and responsibilities will be divided up.
Although the companies have formed a joint committee to study and plan for a merger, no timeline has been given for when the marriage may be complete.
Above: Geely Preface Concept.
Geely purchased Volvo Cars from Ford in 2010 for around US$1.3 billion ($1.9 billion) when the Blue Oval was selling off its Premier Automotive Group.
The two automakers have worked on various projects together since then, including the Compact Modular Architecture, which underpins the Volvo XC40, as well as all models in the Lynk & Co range and some Geely vehicles.
Last year Geely and Volvo announced they were going to merge their combustion engine development operations.