MILAN (Reuters) -Volvo Cars launched its EX30 fully-electric small SUV on Wednesday with two battery options and a starting price of around 36,000 euros ($38,500), as carmakers compete with Tesla to make electric vehicles (EVs) more affordable.

The EX30 is the smallest SUV to date from the Sweden-based manufacturer and follows the unveiling of the larger electric EX90 in November.

"It's a small SUV doing Volvo things," CEO Jim Rowan said during the car's launch event in Milan, Italy.

The starting price compares with over 40,000 euros for Tesla's Model 3, the U.S. group's cheapest car. Tesla has cut prices several times this year to try to boost demand as competition heats up among EV makers.

Rowan however has said the group didn't need to follow Tesla on EV price cuts as market demand was healthy.

Volvo - which aims for half of its sales volumes to be EVs by mid-decade and to only sell EV by 2030 - said the EX30 was one of its biggest business opportunities in the coming years.

"Customers get a premium fully electric SUV for a similar price to combustion engine-powered equivalents," the group said.

The EX30 will be produced in the Zhangjiakou plant in China - which is operated by Geely, Volvo's controlling shareholder. - and is due to start later in 2023.

The new model is from Wednesday available to order in some markets including Europe with initial customers being able to expect delivery early 2024.

The car will as a result be delivered earlier than its larger EV SUV, EX90, which it unveiled in November of last year. The EX90 will start production in the first half of 2024 due to production delays.

The automaker will offer two battery types, the cheaper and less resource-intensive 51 KWh LFP (lithium iron phosphate) batteries offer a range of up to 344 km and are targeted at drivers mostly travelling within cities or over shorter distances, helping to keep the car's entry price down, Volvo said.

More efficient 69 KWh NMC (nickel manganese cobalt) batteries will offer EX30 buyers an extended range of up to 480 km.

In its most expensive version, the new model will cost around 52,000 euros.

Volvo said that, based on initial data in two markets, the total cost of ownership for the EX30 was lower than that of any other of its fully electric cars and of most competitors in the electric, small SUV segment.

Electric SUVs from European premium brands such as BMW, Mercedes and Audi currently cost at least 56,000 euros. The EX30's entry price is comparable to that of the EV version of Jeep's Avenger small SUV.

($1 = 0.9359 euros)

(Reporting by Giulio Piovaccari in Milan and Marie Mannes in StockholmEditing by Mark Potter and David Evans)