Nanjing Automobile Corporation and the SAIC Group have signed a letter of intent that will see the two companies build the largest automotive group in China.

NAC denied that the alliance equated to an SAIC takeover, claiming that “the exact detail of the future relationship” had not been finalised and described it as a “joint co-operation”.

SAIC, the larger and more profitable of the two companies, has made it clear that the impetus for co-operation came from the Chinese government,.

Both carmakers are state owned and the government is known to be seeking consolidation in China's automotive industry.

“The two parties have agreed to an initial exploration of a co-operation,” said Wang Hong Biao, chairman of NAC UK.

“The parties have signed a letter of intent and will now seek to explore all future opportunities and strategies. Any future plans will only serve to strengthen the position of each company and its workforce.”

Longbridge looks set to figure prominently in the future partnership with both carmakers claiming the former MG Rover production plant would play a “strategic role” in the future.

NAC said the site offered considerable overseas expansion opportunities for both sides and was fundamental to the future of the MG brand in Europe.