Chinese electric vehicle (EV) manufacturers are increasingly shifting their focus towards humanoid robotics as the domestic car market experiences a significant slowdown. Companies like Xpeng and Xiaomi are investing heavily in this new sector, aiming to diversify their business and improve their market valuation.
This strategic pivot comes as the EV market faces intense competition and weakening profitability, with some major players seeing substantial drops in share value. While the commercial viability of humanoid robots is still under scrutiny, Chinese automakers believe they can leverage their existing supply chains and manufacturing expertise to gain an advantage.
- Xpeng, Xiaomi, and other Chinese electric car manufacturers are expanding into humanoid robotics, either directly or indirectly.
- This strategic shift aims to redefine their "capital valuation narratives" and position them as technology leaders, according to Counterpoint Research.
- The diversification is driven by a slowdown in China's EV market, characterized by intense competition and weakening profitability.
China's electric vehicle (EV) industry, once a booming sector, is now facing a significant slowdown. In response, leading Chinese EV manufacturers are pivoting towards the burgeoning field of humanoid robotics. This strategic shift is an attempt to overcome challenges posed by intense market competition, declining sales, and weakening profitability.
Companies like Xpeng, which recently announced robot production plans, are navigating an EV market projected to have its worst year since 2021. This diversification into robotics is seen as a move to "reshape capital valuation narratives" and bolster the perception of these companies as innovative technology firms, thereby establishing a new growth trajectory, according to Kevin Li, associate director at Counterpoint Research.
The pressure is palpable, with Xpeng shares experiencing a more than 45% decline this year, making it the laggard among major EV players. Even EV giant BYD has seen its shares drop over 13% amid slumping sales.
Globally, nearly 20 car companies have ventured into humanoid robotics. As of August, Chinese automakers represented over half of these entrants, engaging through in-house development, investment, or incubation, according to Counterpoint.
The investment arm of EV maker Nio has also channeled investments into humanoid robotics startups like LimX Dynamics and Acorn Robot, according to PitchBook data.
This diversification strategy is occurring against a backdrop of slowing growth and reduced profitability in China's EV sector. Data from the China Association of Automobile Manufacturers, as cited by Counterpoint, indicates that the average profit margin in China's vehicle manufacturing sector was a mere 1.5% in the first half of 2026.
Companies such as Xiaomi, Li Auto, and Geely are also exploring the robotics sector, albeit with varied approaches. Jing Yang, director of Asia-Pacific corporate ratings at Fitch Ratings, notes that "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." She further elaborated that this allows them to "pursue alternative growth drivers, achieve economies of scale for shared advanced technologies, and potentially improve profitability over the medium term."
However, investors remain cautious. Xpeng's shares dipped following a $900 million fundraising round for its robotics division, which the company hailed as the largest single round in China's "embodied" AI industry. This valuation placed the robotics unit at over $6.3 billion, nearly matching the estimated $6.5 billion value of Xpeng's core EV business, according to Citi.
Can Humanoids Offer an Edge Over Tesla?
While Tesla's development of its Optimus humanoid in the U.S. presents a parallel, Chinese automakers believe their approach offers distinct advantages. Xiaoyi Lei, senior research analyst at Jefferies Hong Kong, highlights that Chinese manufacturers can leverage a substantial portion of their existing supply chain. For instance, Xpeng can repurpose up to 85% of its motors, chips, and smart driving software for its humanoid robots. This allows for immediate deployment in dealerships and factories, circumventing the need for immediate consumer adoption.
Xpeng has announced plans to commence mass production of its robots by the end of this year, initially deploying them within its own retail spaces and business facilities. The company intends to broaden the market reach to China and overseas markets in the following year.
Lei also points out that automakers possess inherent expertise in large-scale manufacturing. The ability to produce thousands of reliable and serviceable robots is a daily reality for these companies. "Chinese players are the ones actually pushing it into daily use," Lei stated, emphasizing that in-house deployment facilitates cheaper and more efficient data collection, which is crucial for the commercialization of humanoid technology.
Xiaomi, a consumer electronics giant that entered the EV market in 2024, began testing humanoid robots in its factory this year. BYD also has the potential to deploy robots within its manufacturing facilities. However, Li suggests that Geely and Xpeng might stand to gain more from diversification in the medium to long term, particularly noting Xpeng's robust focus on its AI strategy.
The Hurdles of Humanoid Commercialization
Despite the industry's enthusiasm, the question of whether humanoid robots can generate significant demand beyond the automotive sector remains open. Jefferies has yet to observe concrete external orders or clear revenue projections from the automakers' robotics divisions for the upcoming year.
Unitree, a prominent humanoid robotics company, experienced a substantial surge in its stock price upon its Shanghai debut, but the shares have since seen a notable decline. Founder Wang Xingxing has cautioned that widespread commercialization could still be years away, estimating the sector's "ChatGPT moment" to be perhaps a decade out. Furthermore, adapting automotive technology for robotics presents its own set of challenges.
Lei commented, "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."
