The Handelsblatt financial daily reported that forced labour may have been used to build a test track in Turpan, Xinjiang in 2019.
VW said it had seen no evidence of human rights violations in connection with the project but vowed to investigate any new information that came to light.
And in an apparent sign of the growing pressure on the group over its presence in the region, VW added that it was in talks with its Chinese joint-venture partner SAIC "about the future direction of business activities in Xinjiang".
"Various scenarios are currently being intensively examined," VW said in a statement.
Calls have grown louder for VW to reconsider its business activities in the region after German chemicals giant BASF announced last week that it would accelerate its exit from two joint ventures in Xinjiang.
Rights campaigners have for years accused Beijing of a brutal crackdown against Uyghurs and other Muslim minorities in Xinjiang, including through forced labour and detention camps.
Beijing denies allegations of abuse and insists its actions in Xinjiang have helped to combat extremism and enhance development.
Xinjiang is home to numerous factories that supply multinational companies, including big-name Western brands.
VW has long come under scrutiny over its factory in Urumqi in Xinjiang, which opened in 2013 and in which it has a stake via its joint venture partner SAIC.
An external audit commissioned by VW last year found no evidence of forced labour among the plant's 197 employees.
But the consultancy that wrote the report acknowledged "the challenges in collecting data" for audits in China.
The Turpan test track was not part of the audit.
- 'No go' area -
Politicians from Chancellor Olaf Scholz's three-way coalition between the Social Democrats (SPD), the Greens and the pro-business FDP have in recent days added to pleas for VW to quit the Chinese region.
Xinjiang "must become a no-go area for the economic activities of Western companies, including VW," Renata Alt from the FDP, chair of the German parliament's human rights committee, told the Tagesspiegel newspaper.
"The human rights situation in Xinjiang is so catastrophic and intransparent, that German companies should not operate there," added SPD lawmaker Frank Schwabe.
Germany's BASF led the way on Friday when it declared it would speed up the sale of its stakes in two companies in Xinjiang, citing mainly environmental and commercial reasons.
But the move came after broadcaster ZDF and news outlet Der Spiegel said staff from its Chinese joint venture partner Markor were alleged to have been involved in Uyghur rights abuses.
According to the reports, Markor staff had taken part in visits to homes of Uyghur families in order to spy on them.
The German company said regular audits had shown no evidence of rights violations at the two joint ventures, but that the media reports "contain serious allegations that indicate activities inconsistent with BASF's values".
BASF, which did not give a timeline for the divestment, also stressed its ongoing commitment to China, including the construction of a 10-billion-euro ($10.8-billion) new chemical complex in the southern province of Guangdong.
Katja Drinhausen, an analyst at the Mercator Institute for China Studies in Berlin, said the careful wording showed "that multinational companies like BASF or Volkswagen not only face legal and contractual obligations, but also political risks" as they weigh their responses to the Xinjiang controversies.
All those considerations make "a quick exit very unlikely", she added.
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