Chinese carmarker Chery is in talks with troubled Malaysian auto group Proton over creating an alliance that would involve manufacturing in both countries, the Financial Times reported today.

The potential tie-up under discussion would give Chery a manufacturing base in Malaysia in exchange for allowing Proton cars to be produced in China for its booming market, the newspaper said, citing a senior offical from Chery.

The newspaper cited another source close to the negotiations as saying discussions were at an advanced stage although no final agreement had been reached.

If a deal were signed, it is expected to initially involve the assembly of kits of Proton models at facilities in China, while kits of Chery models would be sent to Proton's Malaysian facilities to be assembled.

Chery general manager Ding Gebo refused to comment when contacted by AFP on Thursday.

"We have not released any news yet and I cannot comment," Ding said.

Proton said this month that it was in talks with several potential mainland Chinese partners about a possible deal.

Strategic partners

"We have been rethinking our future and have concluded that we need several strategic partners," Proton chairman Azlan Hashim told the Financial Times earlier in a March 20 report.

"At one point we had thought of forming an alliance with just one but now we are looking for partners in multiple areas, whether for new products, components, market access or other activities."

Chery is best known for its QQ mini-car, which was the subject of a recently settled lawsuit initiated by Detroit-based General Motors over accusations it had copied its own Spark model.

Chery is one of the Chinese groups leading the charge overseas and is developing a series of models aimed at the tough US market, which it hopes to begin selling into next year.

For its part, embattled Proton's search for partners follows the collapse of negotiations in January with Volkswagen as a potential single strategic partner.