Chinese companies rushed into electric cars a decade ago, and now they are expanding into humanoid robots as the EV market sees a slowdown amid intense competition.
While the commercial viability of humanoids has come under scrutiny, it hasn't dissuaded companies such as Xpeng from announcing robot production plans, at a time when China's EV sales are headed for their worst year since 2021.
It's part of a bid to reshape "capital valuation narratives," said Kevin Li, associate director at Counterpoint Research. He added that the automakers are also looking to boost the perception that they are tech companies, and establish a second growth curve.
Xpeng shares have tumbled more than 45% this year, making them the worst performer among major EV players. Shares of EV giant BYD are down more than 13% as sales have slumped.
Chinese automakers accounted for more than half of the nearly 20 car companies globally that have entered the humanoid robotics sector through in-house development, investment or incubation as of August, according to Counterpoint.
The venture arm of EV company Nio has also invested in several humanoid robotics startups such as LimX Dynamics and Acorn Robot, according to PitchBook data.
The business diversification comes as slowing growth and weakening profitability put pressure on China's EV makers. The average profit margin in China's vehicle manufacturing sector stood at 1.5% in the first half of 2026, according to China Association of Automobile Manufacturers data cited by Counterpoint.
Xiaomi, Li Auto and Geely are also among EV makers making moves into the robotics sector, although their strategies differ.
"Given the slowing growth and weakening profitability in the EV market—particularly domestically—it is a natural strategic move for EV companies to diversify into new applications such as robotics," said Jing Yang, director of Asia-Pacific corporate ratings at Fitch Ratings.
"This allows them to pursue alternative growth drivers, achieve economies of scale for shared advanced technologies, and potentially improve profitability over the medium term," she said.
Investors aren't buying the story yet.
Xpeng shares fell after it raised $900 million for its robotics business last month, the largest single round in China's "embodied" AI industry, according to the company. Embodied AI refers to hardware-connected artificial intelligence.
The raise valued the car company's robotics unit at more than $6.3 billion — on par with the $6.5 billion estimated value for Xpeng's EV business, according to Citi.
Advantages over Tesla?
While there are similarities to how electric-car maker Tesla is developing its Optimus humanoid in the U.S., Elon Musk's company, the Chinese automakers' push into robotics have their own advantages, said Xiaoyi Lei, senior research analyst at Jefferies Hong Kong.
She pointed out that Chinese automakers can reuse a significant portion of their supply chain — Xpeng, for example, can use 85% of its motors, chips and smart driving software for humanoids. The robots can then be immediately deployed in the automakers' stores and factories, rather than having to wait for consumers to buy them, she added.
Xpeng said Tuesday it plans to begin mass production of its robots by the end of this year, starting in its own stores and business venues. Next year, the company plans to launch the robots to the broader market in China and overseas.
Automakers also know how to build things at scale, Lei said. Producing thousands of robots that are reliable and serviceable is what Chinese automakers already do every day, she added.
"Chinese players are the ones actually pushing it into daily use," Lei said, noting that in-house deployment makes it easier and cheaper for the automakers to collect data — which is critical for humanoid commercialization.
Xiaomi, a consumer electronics company that only launched its first electric car in 2024, started testing humanoid robots at its factory this year.
BYD can also deploy robots in its factories, Counterpoint's Li pointed out. But he said over the medium-to-long term, Geely and Xpeng could better capture the benefits of diversifying beyond cars, pointing to Xpeng's greater emphasis on its physical AI strategy.
Humanoid questions
Whether humanoid robots can generate demand beyond automakers' own operations remains an open-ended question. Lei said Jefferies has yet to see firm external orders from the automakers it covers or clear guidance on external customers and robotics revenue for next year.
Leading humanoid company Unitree saw its shares skyrocket as they debuted in Shanghai last month, but the stock declined for 12 of the 16 sessions since its listing. Founder Wang Xingxing has cautioned that commercialization could still take years, with the humanoid sector's 'ChatGPT' moment likely a decade away.
Reusing car technology for robots may not always be as straightforward as it sounds.
"I would say the real challenge is how they are going to make the algorithm and software stack that is used to be applied to the smart driving system also viable to the humanoid scenario, which is more difficult and more challenging," Lei said.
Facts Only
* Chinese companies entered electric cars a decade ago and are now expanding into humanoid robots.
* The EV market is seeing a slowdown amid intense competition.
* Kevin Li stated this move is part of reshaping "capital valuation narratives."
* Xpeng shares fell more than 45% this year, making it the worst performer among major EV players.
* BYD shares are down more than 13% due to slumped sales.
* Chinese automakers account for more than half of the nearly 20 global car companies in the humanoid robotics sector via in-house development, investment, or incubation as of August.
* Nio's venture arm invested in humanoid robotics startups like LimX Dynamics and Acorn Robot.
* Average profit margin in China's vehicle manufacturing sector was 1.5% in the first half of 2026.
* Xpeng raised $900 million for its robotics business last month, the largest single round in China's "embodied" AI industry.
* The robotics unit was valued at over $6.3 billion, comparable to Xpeng’s EV business valuation estimate.
* Chinese automakers can reuse supply chains (e.g., Xpeng utilizing 85% of motors and software for humanoids).
* Xpeng plans mass production by year-end, starting in its stores and factories.
Executive Summary
Chinese companies are diversifying into humanoid robotics as the electric vehicle (EV) market experiences slowdown and increased competition. This move is positioned to reshape capital valuation narratives and establish a second growth curve for automakers, supported by analysts who suggest it allows for alternative growth drivers and economies of scale in shared technology. Major EV players like Xpeng and BYD are involved, with some having invested in or developed humanoid robotics internally, while others like Xiaomi, Li Auto, and Geely are also exploring the sector with differing strategies.
The pressure to diversify stems from weakening profitability in the domestic vehicle manufacturing sector, evidenced by low average profit margins. This diversification is viewed as a natural strategic response to slowing growth, allowing companies to pursue new growth drivers and potentially improve medium-term profitability. However, the immediate demand for these robots beyond internal operations remains uncertain, as investors are not yet fully buying into the narrative.
Full Take
The narrative pivots on using physical hardware as a bridge to intangible AI growth, a shift made necessary by decelerating growth and margin compression within the established automotive sector. The inherent tension lies between short-term operational pressures—the need for immediate profitability in slow EV sales—and long-term speculative bets on embodied AI market dominance. The argument that automakers can leverage their scale in supply chain management to leapfrog competitors like Tesla is powerful, resting on the premise of manufacturing expertise translating directly to robotics deployment.
The critical unstated assumption is that the complex software and algorithmic challenges of autonomous driving are readily transferable to general-purpose humanoid reasoning. The skepticism raised by experts regarding the viability of repurposing smart-driving stacks for more complex physical tasks suggests a significant gap between hardware scaling and true AI integration. Furthermore, the focus on in-house deployment—collecting proprietary operational data—presents a potential structural advantage over external ventures, but this self-referential loop risks creating an echo chamber where internal metrics dictate external market validation.
What questions remain unanswered are centered on scalability and external demand creation. If the primary challenge is adapting sophisticated AI algorithms to physical embodiment rather than just driving decisions, then the stated advantages of supply chain reuse may be outweighed by the difficulty in developing novel control architectures. The movement suggests a strategic attempt to establish dominance in a nascent field where operational deployment—the ability to physically deploy and service robots at scale—becomes a more valuable moat than pure software innovation alone. How will external market acceptance reconcile with this focus on internal industrial deployment? What are the actual barriers to making embodied AI viable outside of specialized factory settings?
Sentinel — Human
The text functions as a well-structured analytical report that synthesizes market trends, company moves, and expert opinions regarding the intersection of the EV slowdown and the rise of humanoid robotics in China.