Ficosa's products include advanced driver assistance systems with safety features such as blind spot detection, assisted parking and lane departure warnings. Panasonic is looking at the joint development of such systems, the sources said.

The two sides are hammering out details including the size of the stake, in what would be Panasonic's first big M&A investment in the automotive field, the sources said. They aim to reach an agreement by end-March.

The Nikkei newspaper said Panasonic is expected to invest 20 billion yen to 30 billion yen ($183 million-$275 million) in Ficosa for a near 50 percent holding.

Panasonic may raise its stake in the future and turn Ficosa into a subsidiary, the Nikkei added.

The Osaka-based company said it is considering various strategies for its automotive business but nothing has been decided. The sources declined to be identified as the matter has yet to be officially disclosed.

Panasonic has been restructuring its business to shift its focus away from volatile consumer markets to more reliably profitable industrial products, such as auto-related goods.

It supplies batteries for Tesla Motors Inc and in July confirmed it would invest in the U.S. electric carmaker's planned $5 billion lithium-ion battery plant.

Panasonic aims to raise its annual auto-related sales by about 50 percent to 2 trillion yen in fiscal 2019.

Panasonic shares were up 1.1 percent on Thursday morning in Tokyo, in line with the broader market. (1 US dollar = 109.2100 Japanese yen)