Global automotive demand continues to face pressure as consumer appetite for new car purchases wanes, with a preference for maintaining existing vehicles or opting for used cars. To offset revenue shortfalls from declining vehicle sales, major automakers are leveraging their core strength: the industrial-scale capability to manufacture complex hardware, a globally scarce resource.
Specifically, car manufacturers are making significant moves into cutting-edge technology sectors that require both top-tier mass production expertise and the artificial intelligence capabilities they have cultivated in recent years.
Pioneering the Shift
Diversification for automakers is not a new concept, pioneered by Tesla Motors CEO Elon Musk. As early as 2021, Musk asserted that Tesla was more than just a car company but fundamentally an AI enterprise, with ventures including autonomous robotaxis and the production of its Optimus humanoid robot. That same year, Hyundai Group acquired humanoid robotics firm Boston Dynamics.
However, this trend has intensified significantly in recent months. General Motors announced last month it will produce large-scale energy storage batteries for power grids and AI data centers, with the first deliveries planned for 2028. Renault has begun manufacturing drones for the French military. In China, BYD Company Limited has also officially announced its entry into the humanoid robotics R&D and manufacturing space.
While there is currently no evidence that these new ventures will generate substantial profits, with the global auto market broadly contracting, automakers are unwilling to remain solely dependent on the traditional vehicle business.
Market Pressures Driving Change
S&P Global Mobility forecasts that U.S. new car sales will drop to 15.7 million units this year, a 3% year-on-year decline and a 10% fall from the 2016 peak. Although electric vehicle sales from Tesla Motors and some Chinese exporters have rebounded in certain markets, traditional automakers' EV sales have weakened sharply: Ford's Q2 EV sales plummeted 41%, while General Motors' fell 33%. S&P also projects a 7% contraction in China's total vehicle sales this year.
Neil Mehta, an investor at venture capital firm G2 Venture Partners, stated, "Everyone wants a piece of the market for physical AI and the expansion of AI infrastructure."
Historical Precedents and Early Results
Historically, automakers have seen successful diversification. In the 1970s, Ford profitably developed large-scale planned community real estate. In the 1990s, General Motors entered the satellite TV arena, launching the DirecTV brand. In 2003, GM sold DirecTV's parent company, Hughes Electronics, to Rupert Murdoch for $6.6 billion to raise much-needed cash; the proceeds could have been higher if sold at the peak of the dot-com bubble. The satellite TV company has changed hands several times since.
Ford is one of the few automakers already seeing returns from a new business line: energy storage. The company is building plants in Michigan and Kentucky to produce large, stationary storage systems for power grids and AI data centers. In May, Ford announced the creation of a dedicated energy division, which investors viewed as a play on the AI boom, sending its stock soaring 45% within two weeks. Although the share price has since pulled back significantly, it remains up 11% since the announcement.
General Motors' push into energy storage draws inspiration from the strong performance of Tesla Motors' stationary storage business, which last week reported a 41% year-on-year surge in Q2 battery storage deployments.
Following the Robotics Trend
Chinese EV makers are also following Tesla's lead into humanoid robotics. BYD Company Limited announced last month it would begin in-house development of humanoid robots. Li Auto disclosed similar manufacturing plans earlier this year.
XPeng Inc. announced its foray into humanoid robotics back in 2023, with its 'Iron' robot slated for commercial delivery next year. Last month, CEO He Xiaopeng took direct control of the humanoid robotics division to accelerate Iron's mass production.
Recently revealed prototypes show a highly humanoid form with flexible limb movements, featuring simulated skin and muscle structures.
In April, XPeng Inc. invited media to its robotics factory in Guangzhou, where mass production of Iron is set to begin in the second half of this year. Located adjacent to its EV production base, executives noted a natural technological continuity from autonomous driving large models to humanoid robot intelligence systems, making the crossover logical.
He Xiaopeng stated at a media briefing that Iron supports multi-language dialogue and will initially be deployed in showrooms and factories to greet visitors.
Valuation Potential vs. Commercial Reality
Investor Neil Mehta analyzes that while the energy storage business is already delivering returns, the large-scale commercial rollout of humanoid robots will take a much longer time. Nevertheless, automakers' ventures into frontier tech could still drive significant valuation increases.
He believes, "Aside from Tesla, the scaled commercial use of humanoid robots will likely be realized first in the Chinese market."
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