Volvo expects its imminent sale to Geely to boost sales in China, allowing production at its main Torslanda plant in Sweden to rise beyond its current 50 per cent capacity, according to a report in the Financial Times.
The deal, which is expected to be agreed in principal next month and closed by late June, is seen as crucial to the brand's survival. It lost $32m (£28m) last year and has shed 10,000 jobs since 2005.
Key to any deal will be increasing Volvo's modest 30,000 sales in China last year, according to Stephen Odell, Volvo's chief executive.
"At an absolute minimum, they bring an opportunity to bolt on a massive business opportunity in China that we can't by ourselves," said Odell.
Odell also stressed that Geely has no plans to merge its brands with Volvo, although Volvo is expected to source more parts in China.
"They absolutely understand that Geely and Volvo need to be separate brands," said Odell. "Any kind of public contamination isn't good for either brand."
Li Shufu, Geely's chairman and founder, has already presented Volvo's union leaders with a letter of intent pledging to maintain Volvo's manufacturing and research and development capacity in Europe, and its status as an independent company.