Carmakers PSA Peugeot Citroen of France and BMW of Germany are considering an alliance, the financial newspaper La Tribune reported on Monday.
The paper, citing an industry source, said a delegation from BMW visited the offices of the French presidency, prime minister and finance minister on January 21 "to confer with technical advisors."
Contacted by AFP, PSA Peugeot Citroen declined to comment.
Earlier, a French government spokesman likewise would not comment.
"The government is considering new areas of cooperation for French carmakers," the paper said, adding that Peugeot was looking for a "true alliance."
Peugeot and BMW are already cooperating on the 1.4-litre and 1.6-litre engines that are used in the Peugeot 207 and 308 and in the Citroen C4 and C4 Picasso. BMW equips its Mini model with such engines.
The French government is expected to unveil a plan to support the French auto industry in the first half of February.