Currently the world's third biggest producer behind Dongfeng and German-owned Daimler, the merger with its nearest rival will, Volvo believes, elevate it to the top spot.

The Swedish company said in a statement Saturday that it had signed an agreement with Dongfeng Motor Group (DFG) to acquire 45 percent of its new subsidiary Dongfeng Commercial Vehicles (DFCV) that will include "the major part of DFG's mediumand heavy duty commercial vehicles business."

The deal, worth 5.6 billion yuan ($900 million, 669 million euros), will allow Volvo to "become the world's largest manufacturer of heavy-duty trucks," the statement said.

In 2011 Volvo produced 180,000 units, 6,000 fewer than Dongfeng, but a large part of the Chinese firm's production will pass to the new subsidiary.

The deal should be completed in the next 12 months, Volvo said.