Volkswagen Group is in talks to acquire the autonomous driving division of China’s telecom giant Huawei, according to a report in Germany’s Manager Magazin.

Huawei established an autonomous driving technology division in 2019 to reduce its reliance on the telecoms equipment sector, for which it is a world leader. Last year the company confirmed it aimed to develop a fully autonomous driving system by 2025.

Vehicles with autonomous driving capabilities are expected to be a major growth segment of China’s automotive sector in the next two decades and a rising number of technology companies including Baidu, pony.ai and Huawei are looking to establish a strong presence early on.

Volkswagen is the best-selling automotive brand in China, with sales of Volkswagen, Audi and other brands within the group combined amounting to around 3.3 million units in 2021. The German automaker clearly needs to be adequately represented in the autonomous vehicle segment if these growth projections are realised.

Volkswagen already has a strong global partnership with German automotive equipment supplier Bosch, which was recently expanded to include battery systems for electric vehicles (EVs) and also autonomous driving systems.

Whether Volkswagen is in talks with Huawei over an outright acquisition of the latter’s autonomous driving division, or more realistically a strategic and equity partnership, it is likely the two companies plan to join forces primarily to develop opportunities in the local Chinese market.

Neither Volkswagen now Huawei have commented on the acquisition reports.