Chinese car giant Geely may very soon work with Volvo on a new jointly-developed model to rival Audi's A1 and BMW's Mini.

According to media reports, the Swedish manufacturer could tie up with Geely to supply a powerplant for the new compact.

Volvo CEO Stefan Jacoby was quoted as saying that Volvo was considering adding a rival to the Mini and A1, but would need a partner to share the costs, as well as a smaller engine, which would probably be manufactured in conjunction with Volvo's parent company, Zhejiang Geely of China.

According to Jacoby, buyers of premium cars are prepared to pay more for smaller cars as they "no longer define luxury based on the size of the car or the number of cylinders".

But Volvo's focus for the immediate future is expected to be on renewing the company's core ranges, such as the 60, 80/90 and SUV ranges. Niche models, sporty versions of current models, and a new model to rival the Mini and A1 would only follow much later.