The military government in Bangkok was working "urgently" to drawing up the deal, the German daily Frankfurter Allgemeine Zeitung reported, citing unnamed officials close to the case.
Volkswagen spokesman for production Christoph Adomat said the company was evaluating its options in Southeast Asia, but no concrete deal had been finalized.
Thailand is trying to attract more carmakers with tax and duty exemptions. Currently most manufacturers in the country are Japanese brands, including Volkswagen rival Toyota.
The Japanese company has around a third of the Southeast Asian car market, to Volkswagen's 1%.
Candidates for the next batch of licences would need to be producing 100,000 cars per year by 2019, the report said.
Volkswagen already operates one plant in Malaysia via a local partner company.