The EV production qualification Xiaomi is about to receive comes from Borgward, according to local media.

(Image credit: Xiaomi)

Chinese smartphone giant Xiaomi's auto business unit is reportedly close to getting the green light to produce electric vehicles (EVs), signaling a major step forward in gaining support from regulatory authorities.

Xiaomi Auto is close to getting the qualification to produce new energy vehicles (NEVs) in China, local media outlet Jiemian said today, citing two people familiar with the matter.

However, the matter could still be subject to change before the qualification is finally granted, the people said.

China has tightened its regulations on NEV production qualifications since 2017, and emerging car companies established in the past few years have tackled the issue of vehicle production in their own ways.

Nio (NYSE: NIO) chose to have Anhui Jianghuai Automobile Group Corp (JAC) do OEM production of vehicles for it, while Li Auto (NASDAQ: LI) acquired the qualification from Lifan Technology in 2018.

Xpeng (NYSE: XPEV) gained NEV production credentials in March 2020 through its acquisition of Guangdong Foday Co Ltd. Last week, Jiemian reported that Xpeng's plant in Guangzhou, where it is headquartered, was qualified to produce vehicles in January.

The NEV production qualification Xiaomi will receive will come from Borgward, Jiemian said, citing industry sources.

Borgward, a defunct German company that was resurrected by Beiqi Foton in 2014, was declared bankrupt by a court in China on November 29, 2022.

Xiaomi officially announced on March 30, 2021 that it was joining the car-making bandwagon, saying its initial investment in the car business was RMB 10 billion ($1.5 billion), with an expected investment of $10 billion over the next 10 years.

In late November 2021, Xiaomi signed a contract with the Beijing Economic and Technological Development Area Management Committee to build a headquarters base for its automotive business and sales and R&D headquarters in Yizhuang, and will build a car factory with an annual production capacity of 300,000 units.

The plant will be built in two phases, with an annual production capacity of 150,000 vehicles in the first and second phases, respectively, an announcement at the time said, adding that Xiaomi's first car is expected to roll off the production line and achieve mass production in 2024.

Notably, Xiaomi has so far not received NEV production qualification from Chinese regulatory authorities.

On July 29, 2022, Bloomberg reported that Xiaomi was facing difficulties in obtaining regulatory approval for its EV project and has been discussing licensing issues with officials at the National Development and Reform Commission for months, without success.

While some Xiaomi executives hope authorities will eventually give the green light to the EV project, others fear the process will delay the company's plans, according to the report.

In a separate report on August 26, Bloomberg said Xiaomi was in talks with BAIC Group about partnering to produce EVs and was exploring different options, including Xiaomi buying a stake in the second Hyundai plant, which has the full license to produce cars in China.

The partnership could see vehicles built by BAIC BluePark New Energy Technology Co, BAIC Group's electric vehicle brand, and co-branded with Xiaomi, the report said.

In a subsequent report the same day, local media outlet Cailian said Xiaomi would likely take over BAIC's production site in Qingdao, Shandong province in eastern China.

Last September 1, local media outlet Sina Tech today cited two sources familiar with the matter as saying that Xiaomi will most likely not acquire BAIC's factory and has no intention of adopting an OEM production model, but will instead build its own factory.

According to the 2024 mass production schedule, Xiaomi will build its own factory in time to produce electric vehicles, the sources said.

Xiaomi working on two models, 1st model to take on Tesla Model 3, report says