Elon Musk envisions humanoid robots everywhere. China may be the first to make it a reality

Billionaire Elon Musk has put humanoid robots in the spotlight this year, positioning them as central to Tesla‘s valuation, which he thinks could hit tens of trillions of dollars. But Tesla is yet to sell its flagship humanoid robot Optimus.

Instead, it’s likely a slew of Chinese companies that will beat Tesla to the punch and begin ramping up production of robots in 2026, as Beijing puts the technology at the center of its strategic plans.

“China currently leads the United States in the early commercialization of humanoid robots,” Andreas Brauchle, partner at consultancy Horváth, told CNBC by email. “While both countries are expected to build similarly large markets over time, China is scaling more rapidly in this initial phase.”

Humanoid robots are designed to be shaped and move like a human. Artificial intelligence algorithms power their abilities along with complex hardware like semiconductors. Proponents say they could be used across various settings, from factories to hospitality and even in the home.

Over the past few years, China has made robotics a key focus of its tech strategy, unveiling plans to create supply chains and mass production of the machines.

Chinese President Xi Jinping and the country’s top leaders, known as the Central Committee, met in October and released proposals for the “15th five-year plan,” a document that lays out some of the key focus areas for Beijing in the coming years.

“Embodied artificial intelligence,” a term that refers to AI-driven hardware like robotics or driverless cars, was mentioned in the text.

For China, humanoid robots represent an opportunity to address labor challenges in the world’s second-largest economy as well as advancing Beijing’s quest for tech supremacy.

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

China’s birth rates are declining and the population is aging, leading to a reduced number of people in the workforce and rising labor costs. Robots are seen as a way to address this.

Meanwhile, China is locked in an ongoing tech race with the U.S. across multiple sectors. 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 has been meeting with the CEOs of robotics companies to form a plan to accelerate the industry. Washington is considering issuing an executive order on robotics next year, Politico reported, citing people familiar with the matter.

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

Chinese robotics firms are attempting to power ahead with mass production.

Unitree, which is gearing up for an initial public offering that could value it at around $7 billion, is one of China’s buzziest robotics players. The company has various robotics models, including humanoids. This year, it debuted its latest model, the H2, showcasing its ability to dance.

UBTech Robotics is another of China’s key players. It makes humanoid robots for both an industrial setting, like a factory, as well as commercial applications, like being a tour guide. UBTech’s flagship industrial model, the Walker S2, is able to swap out its battery itself in order to run 24 hours a day.

The company is listed on the Hong Kong stock exchange and this month carried out a share placement to raise around $400 million to fund its expansion. UBTech plans to deliver 500 industrial robots this year and ramp up production of its humanoid robots to 5,000 in 2026 and 10,000 in 2027, the South China Morning Post reported in November.

AgiBot is another player that said this month its 5,000th humanoid robot rolled off the production line.

China’s manufacturing prowess and success in ramping up production in other products like electric vehicles, may give it an edge when it comes to robotics, analysts said.

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

Indeed, UBTech expects production costs to drop 20% to 30% each year.

Meanwhile, various local governments in China have subsidy programs aimed at companies in the robotics sector.

The U.S. however, has “advantages in AI, autonomy and advanced algorithmic development,” Horváth’s Brauchle said.

American firms are “betting on vertical integration” — which means owning and controlling more of the supply chain — according to McKinsey’s Eloot. This includes components like actuators, which power a robot’s movement, as well as the AI software that is integrated into the final product.

“The belief is that tighter ownership of the full system will deliver superior performance, stronger safety cases, and defensible intellectual property,” Eloot said.

China’s humanoid robot market will initially be bigger than that of the U.S., but will not remain that way forever.

“Over the long term, both countries are expected to converge toward similarly large markets, whereby absolute mass-market penetration is expected after 2040, driven primarily by high-volume adoption in private households,” Brauchle said.

China’s robotics industry is not without its challenges. One bottleneck is its restricted access to certain chips required for robots.

“I think there’s a very high reliance on U.S. chips, for example, Nvidia chips,” Jacqueline Du, head of China industrial tech research at Goldman Sachs, told CNBC’s “The China Connection” last month.

Charlie Dai, principal analyst at Forrester, noted a number of other potential hurdles, such as AI limitations in unpredictable operating conditions for humanoids and regulatory barriers.

“Together, these challenges slow commercialization over the next two years and require coordinated innovation, security, and policy frameworks,” Dai told CNBC.

There are also the technological difficulties of replicating the human movement of limbs like hands and fingers — an incredibly complex task that demands capable of mimicking biological functions. “Most robotic hands fall well short in effective degrees of freedom, sharply limiting their range,” McKinsey’s Eloot notes.

Finally, perhaps the biggest challenge is bringing the cost of these complex machines down. Eloot said that product costs for today’s advanced humanoid prototypes range from $150,000 to $500,000 per unit. Those need to come down to between $20,000 to $50,000 per unit to “compete with human labor.”

Even though robotics is a strategic priority for China, this hasn’t stopped regulators from warning about a potentially overheated market.

In November, China’s top economic planning agency, the National Development and Reform Commission (NDRC), warned there is a risk of a bubble forming in the humanoid robotic market. The NDRC said that there are more than 150 humanoid robotics companies in China, with that number growing, and many of them are bringing out similar products.

In the past, there have been boom and bust cycles around technology that Beijing has given strategic importance, such as electric vehicles.

“Many assume that humanoid robots will soon exceed human-level versatility, speed and autonomy. Manufacturers reinforce this perception through polished demonstration videos and staged trade-show performances that present capabilities not yet reproducible in real industrial environments,” Horváth’s Brauchle said.

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

“A market correction could slow innovation and commercialization momentum,” Forrester’s Dai added.