Chinese Tesla rival is planning to launch a $7,800 ‘ultra-compact’ electric car in 2018 with changeable batteries

The electric car market continues to heat up with new entrants looking to take on the likes of Tesla and traditional automakers in the space.

Chinese start-up CHJ Automotive is the latest player looking to come to market. The company is currently developing two vehicles – an "ultra-compact" electric car, and a hybrid SUV.

Co-Founder Kevin Shen did not reveal the names of the vehicles, hoping to keep them a surprise until later, but did reveal to CNBC that the company is aiming for a launch in March 2018 for the compact car.

CHJ Automotive have not released official images yet of the car, but showed CNBC some of the initial designs of the ultra-compact vehicle. The car is 2.5 meters long and 1 meter wide. It runs on two batteries which are swappable, meaning that the car won't need to stop for too long at a charging station to re-juice. Google's in-car operating system called Android Auto is equipped in the vehicle

It will be priced at between 7,000 euros ($7,824) and 8,000 euros.

While it may seem like a small vehicle, Shen explained the target market the company is after in China.

"In China, there are 340 million people (who) daily commute with e-scooters, but there is a strong demand for them to upgrade to something," Shen told CNBC in a TV interview on Friday.

"But we cannot imagine all of them driving cars, so we want to give them something else, which is an ultra-compact car."

It's not just the Chinese market CHJ is after. Shen said the company will launch the product in Europe too, but not as a consumer offering, meaning people will not be able to buy a vehicle. Instead, the company is trailing ride sharing projects.

On Friday, CHJ created a joint venture with French firm Clem, which creates a car-sharing platform for users. CHJ and Clem are trialing a car-sharing service in Paris, where Shen said the ultra-compact car could help ease traffic.

CHJ is the latest entrant into the electric car space. Competitors include the likes of Faraday Future, Nio, and even Swedish firm NEVS, which CNBC reported on last week. CHJ also competes with traditional car makers developing electric cars, and Tesla. However, Tesla cars do start at a higher price point, with the cheapest vehicle – the Model 3 – beginning at around $30,000.

Even as CHJ expands globally, Tesla is creeping in on the start-ups home turf. In 2016, Tesla sold $1 billion worth of vehicles. But Shen is not worried saying that China sells in excess of 25 million cars each year with just a small fraction being electric vehicles.

"There is a very big market for everybody," Shen told CNBC.