Malaysia's Naza Group is reportedly in talks with PSA Peugeot-Citroen to jointly develop a compact car.

The Malaysian Reserve saily said the two parties plan to develop a 1.6 litre that will target the Malaysian and regional markets.

The move is part of plans to make Malaysia Peugeot's manufacturing hub for the region, the report added.

Naza already sells Peugeot cars in Malaysia. Naza Group is the franchise holder in Malaysia for Ferrari, Kia, Peugeot, Brabus, Hamann and Ducati bikes.

Naza has rebadged Kia's Carnival, Carens, Picanto vehicles as Naza Ria, Citra and Suria respectively for Malaysian market. In April 2006, Naza developed the Naza Sutera based on Hafei Lobo. It was joined by a Naza-badged version of the Peugeot 206 called the Naza 206 Bestari in May 2006, and a Naza-badged version of the Kia Picanto in November 2006.