BEIJING (BLOOMBERG) – Xiaomi is facing difficulties getting regulatory approval for its electric vehicle project in China, an unexpected hurdle for the smartphone giant’s US$10 billion (S$14 billion) carmaking endeavour.

The Beijing-based company has been talking to officials at the National Development and Reform Commission about the licensing for months without success, according to people familiar with the matter.

Xiaomi is one of the later would-be entrants to a Chinese EV sector already teeming with rivals, including longer-established names BYD and Nio.

Billionaire co-founder Lei Jun, who has said EVs will be his final startup endeavour, is leaning on Xiaomi’s expertise in connected technologies and building loyal user communities to catch up. But the longer the delay in securing a licence, the bigger the headstart its rivals will gain.

The smartphone and electronics maker is pursuing new growth areas after logging its first sales decline on record in the first quarter.

While some Xiaomi executives are hopeful regulators will eventually green-light the EV project, others worry the process will delay the company’s plans.

Xiaomi incorporated its EV subsidiary in September 2021, allowing the company to begin the application process.

China has been stepping up scrutiny of the EV sector, after a rush into the industry led to a spate of high-profile bankruptcies. New EV applicants are asked to submit a series of documents to prove their financial and technological capabilities, and the review process can take months.

The government also sometimes rejects applications, with companies then back at square one when it comes to the regulatory process.

The absence of a carmaking licence has had limited impact on Xiaomi’s EV development efforts for now. The EV division has more than 1,000 employees, and Xiaomi has said it plans to mass produce its first vehicle in 2024.

It has acquired land in the south-eastern suburbs of Beijing for an assembly plant, and bought EV startups to add technology.

In early 2021, Mr Lei pledged to invest about US$10 billion over 10 years to make Xiaomi-branded cars. The 52-year-old has largely retreated from the public eye to spend time on the EV project.

China’s electric car market is already crowded, with Tesla, Nio and Warren Buffett-backed BYD among the biggest players. A growing number of tech companies from Baidu to Huawei Technologies are exploring business opportunities in autonomous driving, smart cockpit and power management technologies.