The Xiaomi logo is seen in a Xiaomi Shop in Shanghai.
The new units, called Xiaomi EV Inc, opened with registered capital of 10 billion yuan $.55 billion and Xiaomi CEO Lei Jun as its legal representative, Xiaomi said in a statement.
Some 300 staff have been recruited so far to join the EV unit and it continues to recruit talent, said it.
The smartphone maker, which became the second top selling brand behind Samsung in the second quarter, confirmed its foray into electric cars in March with an announcement to invest $10 billion over the next 10 years.
Lei said at the time that the push into electric vehicles would mark his last major entrepreneurial project. Xiaomi said on Wednesday that it has since conducted more than 2,000 interview surveys and visited over 10 industry peers and partners. However, it has few details of its strategy for the automotive sector or vehicle types it intends to launch.
Last week, the company said that it bought autonomous driving startup Deepmotion for over $77 million in an effort to stimulate research and development.
In response to the news, a Xiaomi spokesperson wrote on the company social media account that it is in touch with several automakers but has yet to decide which one to work with.
Xiaomi's second-quarter earnings beat analysts estimates last week, with revenues and net profits growing 64% and 87.4% respectively. The company's share of the global mobile market surged following the exit from its chief competitor, Huawei Technologies Co Ltd, in the face of U.S. government sanctions.