Xiaomi to manufacture EVs using another company’s plant

China’s Xiaomi Corp plans to make electric vehicles (EVs) using Great Wall Motor Co Ltd’s factory, said three people with direct knowledge of the matter, making it the latest tech firm to join the smart mobility race.

The tech firm’s stock price was up more than 9% in the afternoon Friday trade after Reuters reported the plan. Great Wall’s Hong Kong stock rose more than 15% and its Shanghai shares gained by their maximum 10% daily limit.

Xiaomi, one of the world’s biggest smartphone makers, is in talks to use one of the Great Wall’s plants in China to make EVs under its own brand, said two of the people, who declined to be identified as the information is not public.

Xiaomi will aim its EVs at the mass market, in line with the broader positioning of its electronics products, the two people said.

Great Wall, which has not before offered manufacturing services to other companies, will provide engineering consultancy to speed up the project, said one of the people.

Both companies plan to announce the partnership as soon as early next week, said another person.

The plan comes as Xiaomi seeks to diversify its revenue streams from the smartphone business which accounts for the bulk of its income but carries razor-thin profit margins. It flagged on Wednesday rising costs from a global chip shortage and reported quarterly revenue below market estimates.

The move also comes against the backdrop of automakers and tech firms working closer together to develop smarter vehicles with technology such as smart cabins and autonomous driving.

Xiaomi’s founder and chief executive, Lei Jun, believes the firm’s expertise in hardware manufacturing will help accelerate the design and production of its EVs, one of the people said.

“Xiaomi wants to find a mature automobile manufacturer to provide model infrastructure, enabling its own advantages in mobile internet technology,” said Alan Kang, senior analyst at LMC Automotive.