The parent company of Geely Automobile Holdings has said it plans to buy Chinese automaker Zhejiang Zhongyu Automobile Co.

The move would expand Geely’s product portfolio further. Zhongyu Auto is a low volume manufacturer in eastern China that makes premium multi-purpose vehicles, according to reports.

The Chinese government is encouraging the consolidation where possible of its highly fragmented automotive industry.

Geely said it would use Zhongyu Auto’s existing facilities and technology to develop its own premium passenger cars, multi-purpose vehicles and special-purpose vehicles.

Geely also plans to build a crash test centre.

Zhongyu Auto reportedly makes vehicles based on Daimler technology.

Geely is also in line to acquire Ford’s Volvo Cars unit, but the deal is yet to be finalised.