After months of rumors, Chinese smartphone giant Xiaomi has finally confirmed the launch of its electric car business, joining the increasingly booming market.

Xiaomi's board of directors has approved the creation of a smart electric vehicle business, the smartphone giant said in an announcement on the Hong Kong Stock Exchange on Tuesday, adding that it plans to set up a wholly-owned subsidiary to handle the business.

The subsidiary will have an initial investment of 10 billion yuan ($1.5 billion) and is expected to invest $10 billion over the next 10 years.

Lei Jun, chief executive officer of Xiaomi Group, will also serve as chief executive officer of the smart electric vehicle business.

Xiaomi hopes to enable global users to enjoy a ubiquitous smart life with high-quality electric vehicles, the company's announcement said.

Lei visited Tesla CEO Elon Musk twice in the United States in 2013.

Lei once wrote on his WeChat account that he was curious about Tesla, whose market value had risen sevenfold in a year to more than $20 billion at the time, and the smart electric car industry in which it operates.

Now Xiaomi is among the top three in the world in the smartphone industry, but at the same time, global cell phone sales growth has stagnated.

The most popular sector in the market today is smart electric vehicles, and the report says that Nio, for example, which is only six years old, now has a market capitalization of $85.6 billion, only about 6 percent less than Xiaomi's $91.1 billion.

Xiaomi's initial discussions on brand positioning are similar to Xpeng Motors, focusing on the mid-to-high-end market with strong technology attributes, 36kr report earlier this month

In late February, Lei had an appointment with Nio founder William Li to consult on a car build, the report said.

(File photo: Xiaomi founder Lei Jun (left) and Nio founder William Li.)

Xiaomi reportedly plans to spend $15 billion on electric cars