Nissan Motor Co is in talks with Daimler AG to procure large engines from the German firm, the Nikkei business daily said on Tuesday.

Nissan, Japan's third-biggest automaker, may supply electric cars and batteries to Daimler, the daily said.

Nissan's French partner Renault SA is already in partnership talks with Daimler and these discussions will likely expand into three-way negotiations, the paper said.

Media reports on the three-way negotiations including a possible equity tie-up emerged last week. Nissan Chief Executive Carlos Ghosn, who also heads Renault, said only that he was open to an equity exchange.

A Nissan spokesman declined to comment on the Nikkei report on Tuesday.

Ghosn will brief Nissan executives this week on the details and aims of Renault's comprehensive partnership talks with Daimler, the Nikkei said. The Japanese automaker will then fully jump into the negotiations, the paper said.

One focal point is whether the Nissan-Renault camp and Daimler can reach an agreement before the German automaker's general shareholders meeting on April 14, the Nikkei said.

Despite talk of Renault and Daimler taking stakes of several percent in each other, the German firm is apparently cautious about forming a capital tie-up, the paper said.

Separately, a Nissan spokesman said the automaker had told its suppliers of plans to produce 3.698 million vehicles in the financial year to March 2011. That would mark an all-time high and a 13 percent rise from the 3.287 million Nissan has projected for the 2009/10 business year.

The spokesman noted that Nissan's guidance to suppliers and production plans disclosed under its financial results are not necessarily the same.

Nissan is set to get a sales lift from starting to offer its new Micra subcompact, which it began manufacturing in Thailand this month.

Nissan also aims to expand in Russia by launching the Murano sport utility vehicle as its third model there at the beginning of 2011.

For the next fiscal year, the automaker plans to increase its manufacturing in Japan by 9.7 percent to 1.13 million units, the Nikkei said.

Shares of Nissan closed up 0.1 percent on Tuesday while the Nikkei average lost 0.5 percent.

(Reporting by Jennifer Robin Raj in Bangalore and Nobuhiro Kubo and Chang-Ran Kim in Tokyo; Editing by Don Sebastian and Chris Gallagher)

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