Why Tesla's AI shift is pushing Chinese EV rivals beyond just making cars

Tesla's move from carmaking to AI and robotics is influencing Chinese EV firms; companies like Xpeng and Nio are expanding into robots, chips and flying cars to stay competitive

Even as Tesla struggles with weaker sales and profits in China, its influence over the country’s electric vehicle makers remains strong. Leading Chinese EV companies are closely watching Tesla’s move away from being just a carmaker and towards becoming an artificial intelligence player, and are following a similar path, the South China Morning Post reported.

 

Companies such as Xpeng, Li Auto, and Nio, which have long been seen as Tesla’s main challengers in China, are expanding beyond electric cars. They are investing heavily in advanced technologies to shape what they see as the future of transport, the news report said.

 

 

Beyond cars: Robots, chips and flying vehicles

 

Chinese electric vehicle firms are now working on next-generation vehicles, humanoid robots, flying cars and even semiconductors. Their goal is to build full technology ecosystems and give consumers new mobility choices, while competing with Tesla in emerging areas beyond traditional cars.

 

The news report quoted Phate Zhang, founder of a Shanghai-based EV data platform, as saying that Tesla continues to set the direction for the industry. He said that the US company’s shift from vehicle manufacturing to AI-driven technologies has already encouraged Chinese rivals to strengthen their own tech capabilities.   

 

Tesla pivots towards AI, robotics

 

Earlier this week, Tesla said it plans to spend around $20 billion this year to simplify its electric vehicle lineup and move more resources into artificial intelligence and robotics. As part of this strategy, the company said it will phase out its Model S and Model X cars and use that factory capacity to produce its Optimus humanoid robots, Bloomberg reported.

 

The company has also agreed to invest $2 billion in Elon Musk’s AI startup xAI and is in talks about setting up a semiconductor manufacturing facility.

 

Falling sales and profits for Tesla

 

The strategic shift comes at a time when Tesla’s core electric vehicle business is under pressure. Last year, its net profit fell by 46 per cent, while global deliveries declined by 8.6 per cent to 1.64 million vehicles.

 

Tesla also lost its position as the world’s largest pure electric carmaker to China’s BYD, which sold 2.26 million battery-powered EVs in 2025, marking a 28 per cent rise from the previous year. BYD also produces plug-in hybrid vehicles.

 

Despite this, analysts say Tesla still plays a key role in shaping the industry. Ding Haifeng, a consultant at Shanghai-based advisory firm Integrity, said Tesla’s reduced importance as an electric vehicle seller does not weaken its wider influence. He added that autonomous driving and robotics are the two areas where Chinese technology companies are racing to catch up.

 

China dominates global EV sales

 

China continues to lead the global EV market. Around 70 per cent of electric vehicles sold worldwide last year were sold on the mainland, the news report said.

 

Analysts say Chinese automakers and suppliers are at the forefront of EV production and innovation, supported by government policies and consumers who are open to trying new technologies.

 

AI ambitions drive Chinese EV players

 

Elon Musk has repeatedly highlighted Tesla’s strengths in AI and autonomous driving, arguing that these capabilities justify the company’s high stock market valuation.

 

Chinese executives share a similar view. The co-founder of Nio said that any ambitious carmaker today must aim to transform itself into an AI-focused company.

 

Xpeng CEO said that his company is developing flying cars and robots through its subsidiaries and plans to begin mass production this year. He said the company hopes to sell one million robots annually by 2030 and is working to cut costs so robots can become affordable for household use in China.