The German automaker is reportedly planning to manage Didi's fleet and eventually add purpose-built vehicles.
Volkswagen is reportedly preparing to establish a joint venture with Didi Chuxing, the leading ride-hailing company in China.
The German automaker is expected to manage a fleet of around 100,000 vehicles, mostly Volkswagen Group models, an unnamed executive told Reuters.
The agreement is said to run much deeper than a fleet sale, however, with plans to co-develop a "purpose-built" vehicle for the ride-hailing service.
The venture could give VW an edge as automakers scramble to prepare for a future that may bring less revenue from traditional vehicle ownership and more profit from alternative 'mobility' services in the era of autonomous cars.
"To succeed as a car company in this new ecosystem, we need to know who our customer is, what their journey is and what our strategy should be," the executive said.
The duo is said to be working toward an ultimate goal of producing and deploying autonomous vehicles, mirroring Uber's apparent roadmap in the US and other markets.