(Recasts throughout; adds background on Didi's plans for fleet)
By Norihiko Shirouzu
BEIJING, July 10 (Reuters) - China's Didi Chuxing signed an agreement with German automotive supplier Continental AG on Tuesday to cooperate in developing internet-connected, electric cars tailor-made for Didi's ride hailing services.
Didi currently uses regular passenger cars for its service, but has said it needs more dedicated "purpose-built" vehicles.
These are set to be electric cars that industry experts say may start replacing staples such as the Buick GL8 minivan or the Toyota Camry in congested cities such as Beijing and Shanghai as people increasingly use ride-hailing and shared-car services.
Didi wants to build a fleet of connected, environment-friendly cars with more comfortable seats and luggage space, sources close to the company have told Reuters.
The agreement between Didi and Continental follows an alliance that Didi formed with the German company and 30 other auto industry partners in April, including China's GAC Motor and BAIC Group, as well as Toyota Motor Corp.
"Based on Didi's practical experience on mobility as well as Continental's advanced products and technologies ... the parties will explore cooperation mainly in the areas of intelligent & connected vehicles (ICV) and customised new energy vehicles," Didi said in a statement on Tuesday.
A vehicle adapted to Didi's needs is expected to roll out by 2020, the company said. The two companies signed the agreement in Shanghai on Tuesday. (Reporting by Norihiko Shirouzu; Editing by Sayantani Ghosh and Mark Potter)