Elon Musk wants robots everywhere. China is making it a reality

Billionaire Elon Musk has put the spotlight on humanoid robots this year, putting them at the center of society. teslaHe believes the valuation could reach tens of trillions of dollars. However, Tesla has not yet sold its main humanoid robot, Optimus.

Rather, with the Chinese government putting this technology at the center of its strategic plans, many Chinese companies are likely to beat Tesla outright and start ramping up robot production in 2026.

“China is currently leading the United States in early commercialization of humanoid robots,” Andreas Brauchl, a partner at consulting firm Horvath, told CNBC via email. “Both countries are expected to build similarly large markets over time, but China is scaling up more rapidly at this early stage.”

Humanoid robots are designed to be shaped and move like humans. Artificial intelligence algorithms power their capabilities along with complex hardware such as semiconductors. Proponents say it can be used in a variety of settings, from factories to hospitality and even homes.

China has made robotics a major focus of its technology strategy in recent years, revealing plans to build supply chains and mass produce robots.

Chinese President Xi Jinping and the country’s top leaders, known as the Central Committee, met in October to announce proposals for the 15th Five-Year Plan, a document that sets out some of the Chinese government’s key focus areas in the coming years.

“Embodied artificial intelligence” is a term that refers to AI-powered hardware such as robotics and driverless cars.

For China, humanoid robots represent an opportunity to address labor issues in the world’s second-largest economy, as well as advance Beijing’s pursuit of technological supremacy.

“China’s push to develop humanoid robots is being driven by a combination of addressing demographic pressures, driving the next horizon of economic growth, and strengthening its role in global competition,” Karel Elot, senior partner at McKinsey & Company, told CNBC.

China’s birth rate is declining and the population is aging, leading to a decline in the working population and rising labor costs. Robots are being considered as a way to address this.

Meanwhile, China is embroiled in technology competition with the United States in multiple areas. Robotics, seen as a real-world application of AI, could become a new battleground in 2026. Politico reported this month that Commerce Secretary Howard Lutnick is meeting with CEOs of robotics companies to develop a plan to accelerate the robot industry. Washington is considering issuing an executive order on robotics next year, Politico reported, citing people familiar with the matter.

“China could become the most important market for humanoids,” RBC Capital Markets said in a note this month. Analysts at the bank predict that the global humanoid market will reach $9 trillion by 2050, with China accounting for more than 60% of that.

Chinese robot companies are trying to push mass production.

Unitree is one of China’s most active robotics companies as it prepares for an initial public offering that could value its shares at around $7 billion. The company has a variety of robot models, including humanoids. This year, the latest model “H2” debuted, highlighting its dancing performance.

UBTech Robotics is also one of the leading companies in China. We manufacture humanoid robots that can be used both in industrial environments, such as factories, and in commercial applications, such as tour guides. Walker S2, UBTech’s flagship industrial model, has a replaceable battery itself for 24-hour operation.

The company is listed on the Hong Kong Stock Exchange and this month issued shares to raise about $400 million to fund expansion. UBTech plans to deliver 500 industrial robots this year and increase production of humanoid robots to 5,000 in 2026 and 10,000 in 2027, the South China Morning Post reported in November.

AgiBot also announced this month that its 5,000 humanoid robots rolled off the production line.

Analysts said China’s manufacturing capacity and success in expanding production of other products, such as electric vehicles, could give it an edge when it comes to robotics.

“China’s supply chain depth means companies can develop and manufacture robots at a significant cost advantage compared to other regions,” Ethan Chee, associate director at Counterpoint Research, told CNBC.

In fact, UBTech expects production costs to fall by 20% to 30% each year.

Meanwhile, various local governments in China are implementing subsidy programs for companies in the robotics field.

But the U.S. “has an advantage in AI, autonomy, and advanced algorithm development,” Horvath’s Brauchl said.

McKinsey’s Eroot said U.S. companies are “betting on vertical integration,” meaning owning and controlling more of the supply chain. This includes components such as actuators that drive the robot’s movements, as well as the AI ​​software that is integrated into the final product.

“The idea is that greater ownership of the entire system will lead to better performance, stronger security, and defensible intellectual property,” Erault said.

China’s humanoid robot market will initially be larger than the US, but it won’t stay that way forever.

“In the long term, both countries are expected to converge towards similarly large markets, with absolute mass market penetration expected from 2040 onwards, primarily through mass adoption in households,” Broekl said.

China’s robotics industry is not without its challenges. One bottleneck is limited access to certain chips needed by the robot.

“I think there’s a huge dependence on American chips, like Nvidia chips,” Jacqueline Du, head of China industrial technology research at Goldman Sachs, told CNBC’s “The China Connection” last month.

Charlie Dai, principal analyst at Forrester, pointed to a number of other potential obstacles, including AI limitations and regulatory barriers in the unpredictable operating conditions of humanoids.

“These challenges will delay commercialization over the next two years and require a coordinated innovation, security and policy framework,” Dai told CNBC.

There is also the technical difficulty of reproducing the movements of human limbs such as hands and fingers. This is an incredibly complex task that requires being able to mimic biological function. “Most robotic hands have a significant lack of effective degrees of freedom, severely limiting their range,” McKinsey’s Erot said.

Finally, perhaps the biggest challenge is lowering the cost of these complex machines. Eloot said the product cost of today’s advanced humanoid prototypes ranges from $150,000 to $500,000 each. To be “competitive with human labor,” the cost would need to drop from $20,000 to $50,000 per unit.

Even though robotics is a strategic priority for China, regulators have not stopped warning about a potentially overheated market.

China’s top economic planning agency, the National Development and Reform Commission (NDRC), warned in November that there was a risk of a bubble forming in the humanoid robot market. According to the NDRC, there are more than 150 humanoid robot companies in China, and the number is growing, with many launching similar products.

In the past, there have been boom and bust cycles centered around technologies that the Chinese government has placed strategic importance on, such as electric vehicles.

“Many believe that humanoid robots will soon surpass human-level versatility, speed, and autonomy. Manufacturers are reinforcing this perception through sophisticated demonstration videos and exhibition performances that present capabilities that cannot yet be replicated in real industrial environments,” said Horvath’s Brauchl.

“This gap between perception and reality increases the risk of investment bubbles.”

“Market corrections could slow innovation and commercialization momentum,” Forrester’s Dai added.