Geely could gain from using Proton's engineering for its lightweight cars based on standards and regulations in the Asian market. He quit as Proton chairman in March a year ago just before the government injected a RM1.5 billion (S$486 million) grant and asked the firm to look for a strategic partner.
Proton has two Malaysian plants with an annual production capacity of 400,000 cars.
Geely, headquartered in east China's Zhejiang Province, rose to stardom in 2010 when it bought Volvo Cars from Ford. "Once Proton is sold to foreigners it will cease to be a national auto", Mahathir wrote on his blog in February.
Geely will unleash the potential of Lotus.,.[and] will bring Lotus into a new phase of development by expanding and accelerating the rolling out of new products and technologies.
Proton has been bleeding red ink with its market share declining year after year after failed attempts by its conglomerate owner DRB-Hicom to rehabilitate the company.
Last night, Mahathir, at an event in Kuala Lumpur, lamented that the sale meant Proton was no longer a national vehicle.
Despite the vast differences between a six-seat London taxi and a two-seat Lotus sports vehicle, the two share a common goal in keeping weight as low as possible.
"Re-rating is imminent with the stake sale removing DRB's largest overhang, as well as a more positive outlook for Proton", Citi said in a note late Wednesday.
No price was given for Geely's investment in the joint venture.
Yale Zhang, managing director of consulting firm Automotive Foresight, said acquisition is the best way for Geely to get a foothold in the region that has always been dominated by Japanese brands. "Our very own and much- loved brand now has a real chance of making a comeback - a huge one, I hope", Malaysia's Second Finance Minister Johari Abdul Ghani said at a press conference.
Like the taxi, Lotus could also benefit by tapping into Volvo's supplier network for less money than Lotus could negotiate independently.
Geely is also expected to apply Lotus' lightweighting technologies across its wider range to help it meet more stringent emissions targets in China, according to the Financial Times.