The exact form and path of Xiaomi's car manufacturing is still undetermined and perhaps still subject to change, the report said.
The report cited a source familiar with the matter as saying that Xiaomi's project to build a car will likely be led by Xiaomi Group founder Lei Jun himself.
Xiaomi responded to the Securities Times, saying, "No comment for now, please wait for the company announcement."
Lei visited Tesla CEO Elon Musk twice in 2013 in the US. At the time, Tesla's market value had risen 7 times a year to more than $20 billion, and Lei had written on his WeChat account that he was extremely curious about the smart electric car industry.
Now Xiaomi is among the top three in the world in the smartphone industry, but at the same time global cell phone sales growth has stagnated.
The most popular sector in the market today is smart electric vehicles, and the report said that the six-year old Nio, which Lei's Shunwei Capital invested, has a market cap of $85.6 billion, just about 6 percent less than Xiaomi's $91.1 billion.
At this point in time, Lei's curiosity about electric cars is finally coming into action, which is not a surprising choice for Lei and Xiaomi, the report said.
Xiaomi's stock traded in Hong Kong turned from a morning decline to an 11 percent gain on this report.