“People outside China underestimate China. But China is an ass-kicker, next-level.” So said Elon Musk[1] – and he should know, having seen Tesla’s backside well and truly booted by Chinese competitors.
It wasn’t so long ago that Tesla reigned supreme. The company was almost universally regarded as the runaway trailblazer in the arena of electric vehicles (EVs), and its performance consistently reflected an established edge over the rest of the pack.
Arguably the greatest illustration of its pre-eminence was a place among the so-called Magnificent Seven US mega-cap technology stocks. As a member of that elite clique, it played a role in underpinning global equity performance for several years.
It was hard to imagine Tesla could be toppled from such a lofty pedestal. Yet that’s basically what has happened.
By its own elevated standards, the business endured a dismal 2025. Chinese manufacturers made major inroads into the EV market, with BYD securing top spot in terms of worldwide sales[2].
The consumer boycotts sparked by Musk’s flirtations with politics hardly helped Tesla’s cause. But they shouldn’t obscure that Chinese EV makers have increasingly prospered from a combination of lower prices and, at least in some cases, more rapid innovation.
To its credit, Tesla is trying to fight back. It has introduced cheaper models, clearly acknowledging China’s cost advantages. To date, though, evidence of a meaningful renaissance has been only fleeting[3].
Might all this tell us something about China and the West’s wider battle for technological superiority? Very probably. Maybe most importantly, it should encourage us to consider how the race is likely to pan out and where, as a result, we might find the brightest investment opportunities.
Deep commitment and sheer scale
It might be unfair to say Musk has grown weary of EVs, but it seems reasonable to suggest he nowadays finds other areas of innovation more exciting. Foremost among them is humanoid robotics, which has been touted as the next “mega-industry”.
Here, too, Musk is quick to recognise China’s unparalleled bottom-bashing capacity. “To the best of our knowledge,” he said earlier this year, “we don’t see any significant competitors outside of China.”[4]
This assessment became notably relevant barely a month later. In February, during the annual Spring Festival Gala TV extravaganza, China strutted its stuff – quite literally – by parading a troupe of dancing robots that performed perfectly choreographed leaps, backflips and martial artistry.
It was a pretty jaw-dropping spectacle, and casual Western audiences were suitably gobsmacked. Experts, meanwhile, were divided.
Some commentators claimed the display offered scant proof of the droids’ suitability for less structured environments – factories, logistics centres and care facilities, for example. Others insisted the routine served as a dazzling demonstration of China’s ascendency.
Perhaps we should just settle for the fact that China is deeply committed to excelling in this sphere. Beijing sees robotics as nothing less than a strategic priority – a key element of a broader bid to “seize the commanding heights of science and technological development”[5].
To that end, according to state data, more than 450,000 “intelligent robotics” companies had been registered in China by the close of 2024[6]. No, that’s not a typo: the number genuinely exceeded 450,000.
This figure represented a 206% rise from the end of 2020 and a 19% uplift from the end of 2023. In other words – to put it mildly – China is going all-out on the robotics front.
Picks, shovels and smaller companies
The businesses we speak with in China see history repeating itself. As happened with EVs, the robotics space has quickly become extremely crowded – and the way ahead is likely to be defined by fierce competition.
Ultimately, again as with EVs, only a few winners will emerge from the turmoil. They’re likely to be battle-hardened, as good as or better than their rivals in other countries, agile, capable of long-term growth and – crucially – ahead of the game in the cost-efficiency stakes.
This might sound like a recipe for success for China’s dreams of all-round tech dominance, yet it could present something of a problem for investors. After all, how do you pick a handful of would-be winners from a field of 450,000-plus?
In our view, it’s first essential to have an on-the-ground presence. China’s smaller companies tend to receive little or no coverage from investment analysts, as a consequence of which specialist teams with local knowledge are often best placed to identify their potential.
Of course, running the rule over 450,000 candidates would challenge even the most dedicated on-the-ground team. So how might we go about narrowing down this particular investment universe?
We believe the answer lies in focusing on “picks-and-shovels” businesses. These seldom capture the headlines but are nonetheless vital to any tech revolution. In effect, they’re the enablers. Brand-agnostic, they’re going to supply the components – gears, sensors, hydraulic motors – needed by any robotics company that manages to survive and thrive.
Much the same thinking persuaded us to take an early stake in CATL. Founded just 15 years ago, the company is now the number-one producer of batteries for EVs and energy storage globally.
Musk was right to praise China’s ass-kicking capabilities. But what many investors sometimes forget is that here, as in almost every equity market, the biggest ass-kickers of all start out small.
Xin-Yao Ng is Co-Manager of Aberdeen Asia Focus plc.
[1] See, for example, Guardian: “China’s dancing robots: how worried should we be?”, February 18 2026 – https://www.theguardian.com/world/2026/feb/18/china-dancing-humanoid-robots-festival-show.
[2] See, for example, BBC News: “China’s BYD overtakes Tesla as world’s top EV seller”, January 2 2026 – https://www.bbc.co.uk/news/articles/cj9rjwpvmpzo.
[3] See, for example, Washington Post: “Tesla sales rise after brutal year of Musk boycotts but still fall short of expectations”, April 2 2026 – https://www.washingtonpost.com/business/2026/04/02/tesla-sales-ev/5f44b9aa-2e9f-11f1-aac2-f56b5ccad184_story.html.
[4] See, for example, Wall Street Journal: “China is going all-in to beat the US on humanoid robots”, February 7 2026 – https://www.wsj.com/tech/china-is-going-all-in-to-beat-the-u-s-on-humanoid-robots-b9c434d2.
[5] See, for example, Reuters: “China’s new Five-Year Plan calls for AI throughout its economy, tech breakthroughs”, March 5 2026 – https://www.reuters.com/world/asia-pacific/china-vows-accelerate-technological-self-reliance-ai-push-2026-03-05/.
[6] See, for example, China Daily: “China registers over 450,000 smart robotics firms”, February 10 2025 – https://www.chinadaily.com.cn/a/202502/10/WS67a99669a310a2ab06eab353.html.
