(Yicai Global) June 26 -- The rumor of Xiaomi planning to buy a car manufacturing permit of Borgward Automobile, a bankrupt company that used to make Borgward-branded vehicles in China, is turning out to be false.

Beijing Borgward stopped producing vehicles on June 7 and will stop selling cars by December, the Ministry of Industry and Information Technology announced on its website recently. Thereby, the permit is canceled.

Xiaomi will "release news on its production permit to the public at due time," the Beijing-based firm told Yicai Global recently.

Early this year, a rumor circulating online claimed that even though existing car production permits are not allowed to be transferred anymore to avoid overcapacity, Xiaomi will be an exception to the rule.

The Chinese journey of the German marque has been rocky for the past 10 years. Automaker Beiqi Foton Motor acquired Borgward for EUR5 million (USD5.5 million) in 2014. It formed a local subsidiary called Beijing Borgward in January 2016. However, due to poor management, the company sold its controlling stake in Beijing Borgward in 2019. In November 2022, a court ruled that the insolvent carmaker is bankrupt.

Xiaomi is entering the NEV sector as Lei Jun, founder and chief executive, said at an investor meeting in February that the firm is likely to begin mass production of its first model in the first quarter of 2024. It plans to sell 100,000 NEVs in the first year of deliveries.

However, Xiaomi is lacking one key component. The last time the National Development and Reform Commission issued NEV production permits was before 2018. From 2016 to 2017, some 15 firms were successful in their applications but only six of them have achieved mass production.

There are other ways to solve the issue as many startups such as Li Auto and Leapmotor Technology acquired other firms to secure such licenses. Moreover, Nio hired JAC Motors to manufacture its vehicles.

Editor: Emmi Laine