Chinese smartphone maker Xiaomi is in talks with Great Wall Motors to use its factory to produce electric cars and could announce a partnership as soon as next week, Reuters reported on Friday.
The report, citing people familiar with the matter, said Xiaomi's electric car would target the mass market, in line with the company's overall positioning for electronics.
Great Wall, which has never provided manufacturing services to another company before, will provide engineering consulting services to Xiaomi this time to speed up the project, the report said.
Both companies plan to announce the partnership as early as early next week, one of the people familiar with the matter said.
In response to the report, Chinese media quoted Xiaomi as responding, "Everything is subject to the announcement."
Great Wall vice president Fu Xiaokang said he would not comment, but said the company is committed to uniting industry chain stakeholders to create an open ecological platform and build a stronger ecosystem.
"We welcome all relevant industry partners to seek common development and welcome the future together," he said.
Following the report, the shares of Xiaomi, which trade in Hong Kong, expanded to more than 7 percent and Great Wall rose more than 10 percent.
Brand positioning similar to Xpeng
There has been a lot of news about Xiaomi building a car recently.
In February, LatePost reported that Xiaomi had decided to build a car and saw it as a strategic decision.
Subsequently, Xiaomi made an announcement that it has been following the development of the electric vehicle ecosystem and is continuously evaluating and researching the relevant industry dynamics.
Xiaomi also said at the time that its research on the electric car manufacturing business had not yet reached the formal project stage.
A month later, 36kr cited sources familiar with the matter as saying that Xiaomi is fast-tracking the car-making project, which is expected to be launched within 1-2 months at the earliest, with Wang Chuan, chief strategy officer of Xiaomi Group, as the immediate person in charge.
Xiaomi's car business could have a brand positioning similar to Xpeng, focusing on the mid-to-high-end market with strong tech attributes, the report said.
Will Xiaomi threaten Xpeng, Nio, and Li Auto?
While the brand positioning may be similar to Xpeng, Xiaomi's automotive business is unlikely to threaten Xpeng in the near term.
That's because, unlike smartphones, cars have longer production cycles and more complex supply chains. It takes far longer to produce a car than it does to produce a smartphone.
Baidu, for example, a company with a lot of technology in the driverless space, formed a car-making company, Jidu Auto, earlier this year, but its first model won't be released until three years from now.
So for Xiaomi, even if it sets up a car-making company now, it will probably be a few years before its vehicles are delivered to consumers.
For Nio, it is positioned in the luxury market, something that Xiaomi is unlikely to be involved with right off the bat.
Li Auto is already well-positioned in the large SUV market, and it's still unclear whether Xiaomi will succeed if it wants a piece of that market in a few years.
