Nixon was still a resident of New York in 1968, so a Californian would not be out of the question for a running mate. But the Californian Nixon had in mind was Robert Finch (who in winning the Lieutenant Governorship in 1966 actually outpolled Reagan).
My impression--admittedly from post-1968 evidence--is that Nixon never really cared that much for Reagan. He said that "Reagan on a personal basis is terrible", and called him "strange" and not "pleasant to be around." (Yeah, I know--pot, kettle...)
https://www.cbsnews.com/news/tapes-nixon-disliked-reagan/
Nor was his opinion of Reagan's intellect much higher:
President Nixon: What’s your evaluation or Reagan after meeting him several times now.
Kissinger: Well, I think he’s a—actually I think he’s a pretty decent guy.
President Nixon: Oh, decent, no question, but his brains?
Kissinger: Well, his brains, are negligible. I—
President Nixon: He’s really pretty shallow, Henry.
***
President Nixon: Back to Reagan though. It shows you how a man of limited mental capacity simply doesn’t know what the Christ is going on in the foreign area. He’s got to know that on defense—doesn’t he know these battles we fight and fight and fight? Goddamn it, Henry, we’ve been at—
Kissinger: And I told him—he said, “Why don’t you fire the bureaucracy?” I said, “Because there are only so many battles we can fight. We take on the bureaucracy now, they’re going to leak us to death. Name me one thing that we have done that the bureaucracy made us do.”
President Nixon: The bureaucracy has had nothing to do with anything.
Kissinger: No, no. They’ve made our lives harder. They’ve driven us crazy. But that doesn’t affect him.
https://web.archive.org/web/20140301192925/http://whitehousetapes.net/transcript/nixon/620-008
***
Incidentally, years later, after Reagan had become above criticism to most Republicans, Nixon was still not exactly a fan: "Later, Nixon said Reagan’s economic policies were unduly harsh and cautioned against giving him too much credit for winning the Cold War. 'Communism would have collapsed anyway,' he told Monica Crowley, a Nixon aide in his last years, according to her 1996 book, 'Nixon Off the Record.'"
https://www.cbsnews.com/news/tapes-nixon-disliked-reagan/