Siemens AG confirmed on Thursday that it was in an “advanced stage of talks” with Volkswagen on a partnership in diesel injection technology, Dow Jones reported.

According to Dow Jones, Siemens chief executive Heinrich von Pierer, speaking to journalists ahead of the electronics and engineering giant’s annual shareholders meeting, declined to comment on what form the partnership would take.

However, Dow Jones said, German daily newspaper Frankfurter Allgemeine Zeitung reported earlier on Thursday that the companies plan to invest €500 million to build a plant in the eastern German state of Saxony.

The plant, which would join many motor industry plants in the eastern part of the country, would employ 600 people, the newspaper reported, Dow Jones said. The companies expect to get around €150 million in aid from the European Union, it added.

According to Dow Jones, VW spokesman Peter Schlelein declined to give more details until a formal agreement is signed.

Dow Jones said Siemens’ automotive unit VDO is already active in diesel technology and noted that VW is one of Europe’s leaders in selling cars with diesel engines, which have surged in popularity in the past few years.