Musk's latest threat from China is a new luxury EV built by one of its biggest smartphone firms

• Elon Musk thinks that Chinese auto firms like BYD are Tesla's biggest competition.
• Now Tesla has a new rival in China after smartphone maker Xiaomi unveiled its first EV, the SU7.

Elon Musk is already taking heat in China from popular EV-maker BYD. Now Tesla has a new rival in the country as smartphone maker Xiaomi launches its first EV.

The Chinese tech giant unveiled the SU7, a battery-powered luxury vehicle, on Thursday, with Xiaomi's CEO vowing to take on Tesla in the world's largest EV market.

"Xiaomi's goal is to make a dream car that is as good as Porsche and Tesla," said billionaire CEO and co-founder Lei Jun in comments reported by Bloomberg.

Lei did not say how much the SU7, which launches next year and is intended to compete with luxury electric vehicles like the Tesla Model S and Porsche Taycan Turbo, will cost.

Xiaomi, founded in 2010, announced that it would invest $10 billion in EV production in 2021. The company is best known for smartphones that are a little cheaper than Apple or Samsung devices. Xiaomi is the third-most-popular phone maker globally with 14% market share, according to third-quarter shipment data from Counterpoint Research.

It is aiming to turn itself into a major global carmaker within the next few decades, with Lei telling the BBC that the EV push was the "final major entrepreneurial project" of his life.

Xiaomi's entrance into the highly competitive Chinese EV market will add to the growing pressure on Tesla in the country.

The Elon Musk-owned automaker is likely to be overtaken by domestic rival BYD as the world's largest EV producer by the end of 2023, and faces additional threats from other local rivals such as Wuling and Zeekr.

Tesla is reportedly planning to refresh its most popular car in response, with Bloomberg reporting that the company is planning to produce a revamped version of the Model Y in China next year.

Musk has pointed to Chinese EV manufacturers as the US carmaker's main competition, describing them as "extremely competitive" in an interview at the NYT's Dealbook Summit last month.

"By far Tesla's competition is in China. There's a lot of people out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong," he said.

Xiaomi did not immediately respond to a request for comment from Business Insider, made outside normal working hours.