People gather at the booth of Chinese electric vehicle start-up Nio as it unveils its ES8 SUV at the Shanghai auto show, in Shanghai Thomson Reuters Electric car startup Nio just made a huge move to challenge Tesla in China, which is rapidly becoming the most important market for companies pursuing battery-powered vehicles.

Nio unveiled its electric SUV, the Nio ES8, at the Shanghai motor show on Wednesday. The startup said the vehicle will go into production by the end of this year and will be made specifically for the Chinese market. Deliveries are expected in 2018, the company said.

China had more electric car sales than Europe and the US in both 2015 and 2016, a trend unlikely to slow as the government continues to tighten fuel emissions standards.

Tesla has been making moves to gain traction in the country; it tripled its revenue in China to $1 billion in 2016, though it still makes more money in the US.

Chinese internet company Tencent acquired a 5% stake in Tesla in March, highlighting a vote of confidence in Tesla's position in the world's most populous country. (Tencent has also invested in Nio.)

Nio, which is based in Shanghai, is smart to introduce a large SUV at a time where demand for the vehicles is on the rise among affluent Chinese buyers. The startup has offices in Shanghai and San Jose and is led in the US by former Cisco CTO Padmasree Warrior.

Scroll down for a closer look at the Nio ES8: