Daimler, the maker of Mercedes-Benz, and Volvo Cars, are considering cooperating to reduce costs of developing internal combustion engines, German magazine Automobilwoche reported on Sunday, picked up by Reuters. Volvo has been owned by China’s Geely since 2010, and the Chinese carmaker also holds close to 10% stake in Daimler.

The weekly cited a Volvo manager as saying there were initial talks with Daimler, but no concrete plans, while a company spokesman said it was too early to talk about firm projects, although it was not excluding parties. A Daimler spokesman said the company’s cooperation with Geely was developing in a positive way, but declined to elaborate.

In October last year, Volvo said that it would merge its engine development and manufacturing assets with those of parent company Geely, creating a division to supply group brands and also third parties with next-generation ICE and hybrid engines.

The Automobilwoche piece said this new division would start operating by the end of March, and that could be a possible starting point for cooperation with Daimler. A further step could be a partnership to develop electric powertrains.

Geely isn’t in it just for the shareholder bragging rights, as Li Shufu’s company has kicked off projects with Daimler. Both companies are set to build the next generation of Smart electric cars in China through a 50:50 joint venture, and both are also collaborating on a premium ride-hailing service in China. Geely’s deepening ties with Daimler has even caused some friction between the German company and its original Chinese JV partner, BAIC.

The appetite for tie-ups and even full mergers, as seen in the recent FCA-PSA marriage, is because of the auto market being a much tougher place to be in today. Global tariffs, accelerated by a trade war between the US and China, as well as big investments needed for electric and autonomous vehicles, are forcing carmakers to seek new avenues for cost reduction. Daimler is already working with its premium German rival BMW on autonomous tech.