(Bloomberg) -- Xiaomi Corp. declared its ambition for its maiden SU7 to become one of China’s three best-selling luxury electric vehicle models, sounding a challenge to Tesla Inc. and other rivals in an increasingly crowded market.

President Lu Weibing cited that internal target for the SU7, which goes on sale March 28, in one of Xiaomi’s more concrete projections yet for its multi-billion-dollar foray into the world’s largest EV market. Xiaomi’s first EV will test both its technological capabilities and a market that’s experienced a price war and sagging sales growth.

Xiaomi will get help from a slowly recovering smartphone arena. On Tuesday, the company reported a better-than-expected 11% rise in revenue after a surprisingly strong 21% surge in smartphone sales. Net income rose 50%, also beating projections.

The results are a welcome boost for Xiaomi as co-founder Lei Jun prepares to launch his biggest bet in years, a costly effort to break into a Chinese EV market dominated by Tesla and BYD Co. Xiaomi is slated to sell its first EV more than two years after the billionaire entrepreneur announced what he’s called his final major endeavor.

Read More: Xiaomi Surges Most in Year After Setting Up Showdown With Tesla

Xiaomi, which plans a gala launch for the new car, mostly skirted the issue of its EV ambitions in Tuesday’s results filing. But Lei shared on Weibo, a Twitter-like social media service, that Xiaomi’s directors had visited its car plant and test-driven the vehicle.

“Today is a special day, because we formally unveiled Xiaomi’s mega-car factory,” Lei wrote.

Xiaomi is diving into a crowded arena that’s grown less attractive as Tesla and BYD wage a price war to woo Chinese consumers during a period of slowing growth. Apple Inc. nixed its own long-incubating EV project, after failing to overcome challenges in adapting its technological expertise to a whole new field of manufacturing.

But Lei is counting on EVs for an additional growth driver alongside its core smartphone division.

The EV business could drive Xiaomi’s revenue 4% higher this year as the SU7 model is likely to sell for 220,000 to 260,000 yuan, similar to Tesla’s Model 3, according to Bloomberg Intelligence analysts Steven Tseng and Woo Jin Ho. 

On Tuesday, Lu expressed hopes for a better 2024 as its phone and cars businesses take off.

Xiaomi remains reliant on its consumer electronics business for now. The world’s third-largest smartphone maker scored a 23% jump in global shipments in the quarter thanks to holiday promotions, according to data from research firm IDC.

That not only outpaced the market’s 8.5% growth but also key rivals from Apple to Vivo. Back at home though, Xiaomi is mired in a fierce competition with a resurgent Huawei Technologies Co.

“We will be investing in more core technologies,” Lu told reporters after the earnings. “We’re going to launch into more premium markets. In 2024, we will go one step further in premium products in Europe. And in emerging markets, there’re still a lot of opportunities.”

--With assistance from Vlad Savov.

©2024 Bloomberg L.P.