(Adds detail, background)
By Tova Cohen and Andreas Cremer
TEL AVIV/BERLIN, Oct 30 (Reuters) - Germany's Continental AG CONG.DE is in advanced talks to buy Israel's Argus Cyber Security, whose technology guards connected cars from hacking, for about $400 million, Israeli media reported on Monday.
Cybersecurity experts have criticised the automotive industry for failing to do more to secure internal communications of vehicles with network-connected features.
The danger, they say, is that once external security is breached, hackers can have free rein to access onboard vehicle computer systems which manage everything from engines and brakes to air conditioning and infotainment.
Continental, the world's second-biggest supplier to carmakers by sales, makes telematics control devices used to transfer data and enable communication between a vehicle and remote management tools such as web panels and mobile apps.
Carmakers say that any vulnerabilities in this area do not directly affect the critical safety features of a vehicle.
Founded in 2013, Argus has raised $30 million, including $26 million two years ago from Magna International MG.TO , Allianz ALVG.DE , SBI Group and Israeli venture capital funds Magma and Vertex.
"This is not the first time such rumours have circulated and Argus does not comment on rumours or speculation," a spokeswoman for Argus said on Monday.
Officials at Continental declined to comment on what they called "speculation".
Argus already collaborates with Continental - this month it jointly launched a technology for delivering over-the-air vehicle software updates with Continental subsidiary Elektrobit.
MOBILEYE TRIGGER
Earlier this year Intel Corp INTC.O bought autonomous vehicle firm Mobileye (OTC:MBBYF) - one of Israel's biggest tech companies - for $15.3 billion. With more than 200 start-ups, Israel is a growing centre for automotive technology.
Argus CEO Ofer Ben-Noon told Reuters in March the Mobileye deal could accelerate his company's growth. "There is no doubt there will be more investments in Israel for automotive, and a lot more M&A," he said at the time.
Continental said in June it was joining a self-driving platform developed by BMW BMWG.DE , Intel INTC.O and Mobileye with the German auto parts and tire maker handling integration of components and software. costs of integrating hardware, software and data and the accelerating pace of development of self-driving vehicles has sparked a growing number of alliances between automakers and suppliers.
Continental said it would play a role in commercialising the new platform, which is to be sold to other auto manufacturers.
Traditionally, many of Israel's tech start-ups have sold out at an early stage to global companies, keen to tap into the skills of workers trained in the military and intelligence sectors. This was the case with Waze, the Israeli map app, which Google (NASDAQ:GOOGL) bought in 2013 for $1.15 billion.
Only a few - such as cyber security leader Check Point Software CHKP.O and software provider Amdocs DOX.N - have stayed independent long enough to reach a significant size.
(Editing by Louise Heavens and Alexander Smith)