Xiaomi Corp has received approval from China's state planner to manufacture electric vehicles (EVs), according to two people familiar with the matter, a major step towards the smartphone maker's goal of producing cars by early next year.

Earlier this month, the National Development and Reform Commission (NDRC), which regulates new investments and production capacity in China's auto industry, approved EV manufacturing for Beijing-based Xiaomi. Xiaomi's venture is only the fourth to be approved by the NDRC since the end of 2017.

While NDRC's nod brings Xiaomi closer to mass production of EVs more than two years after it first announced the plans, the venture still needs clearance from the Ministry of Industry and Information (MIIT), which assesses new automakers and models for technical and safety requirements.

And it would be entering China's car manufacturing sector at a time when the world's largest auto market is wrestling with a series of issues, including a capacity glut and slowing demand that have stoked a bruising price war and hit supplier margins.

Xiaomi has pledged a $10 billion investment in the automobile industry over a decade, with the goal of mass producing its first vehicles in the first half of 2024. However, there were concerns that the deadline would not be met because the NDRC has been cautious in approving new EV production plans from companies due to concerns about overcapacity and slowing demand in the sector.

According to sources, Tesla Inc's plan to expand its Shanghai plant had yet to be approved. According to industry sources, U.S. luxury EV maker Lucid Group is interested in manufacturing cars in China but has been advised that the likelihood is low.