BEIJING (BLOOMBERG) – Xiaomi is in talks with Beijing Automotive Group to collaborate on producing electric vehicles (EVs), as the technology company races to fulfil a promise to make its own cars by 2024.

The two giants are exploring different options, including Xiaomi buying a stake in Beijing Hyundai No. 2 plant, which is fully licensed to make cars in China, sources familiar with the matter said.

Xiaomi is eyeing a production tie-up as it faces delays in acquiring a licence to make cars on its own.

The collaboration could see vehicles built by Beijing Automotive’s EV brand, Baic BluePark New Energy Technology, and co-branded with Xiaomi.

While the ageing No. 2 plant needs substantial upgrades to manufacture EVs, BluePark has production capacity that could be used to make Xiaomi-Baic vehicles.

Deliberations are preliminary, and there is no guarantee that the negotiation would lead to an agreement.

A representative for Xiaomi declined to comment, while Baic did not immediately respond to requests for comment.

A representative for Hyundai said the claims were groundless, and declined to comment further.

The collaboration would allow Xiaomi co-founder Lei Jun to salvage a pledge to invest about US$10 billion (S$13.9 billion) over a decade to make Xiaomi-branded cars in 2024.

China has been stepping up scrutiny of EV firms after a raft of companies rushed into the sector, lured by tax breaks and government subsidies.

Beijing is encouraging mergers and acquisitions in order to better deploy resources within the industry.

Aspiring EV makers now need to prove their financial and technological capabilities, and non-traditional automakers that are headquartered outside of China or are in the research and development stage are required to meet stringent sales benchmarks.

Baic and South Korean automaker Hyundai Motor opened Beijing Hyundai No.2 plant in 2008 as part of their joint venture. Losses at the venture may continue to weigh on Baic’s earnings, with the partnership’s sales recovery hamstrung by its budget car brand image while plant-utilisation rates struggle to surpass 50 per cent, Bloomberg Intelligence analysts Steve Man and Joanna Chen wrote in March.