Tesla's biggest competitor in humanoid robots will be from China, Musk says

• China is good at both AI and manufacturing, and will definitely be the toughest competition for Tesla, Musk said.
• Musk said that Tesla's Optimus humanoid robot will significantly outperform any robot currently under development in China.

Tesla (NASDAQ: TSLA) CEO Elon Musk believes the company's biggest rival in humanoid robots will emerge from China, just as it did in the electric vehicle (EV) sector.

"Well, I do think that by far, the biggest competition for humanoid robots will be from China. China is incredibly good at scaling manufacturing," the Tesla CEO said during the company's fourth-quarter earnings call on Wednesday.

China is also quite good at artificial intelligence, with excellent free models that keep improving, Musk noted.

China is good at both AI and manufacturing, and will undoubtedly become Tesla's toughest competitor, he said.

Currently, Tesla has no other significant competitors outside China, and China will definitely be tough competition, Musk said.

"I always think people sort of outside of China kind of underestimate China. China's next level."

However, Musk noted that Tesla's Optimus humanoid robot will be much more capable than any Chinese robot currently in development.

"We think we'll be ahead in terms of the real-world intelligence, the electromechanical dexterity, especially the hand design, which is by far the hardest thing in the robot," Musk said.

China has dedicated robotics companies like Unitree and UBTech, while automakers are also actively expanding into this field.

Last November, Xpeng (NYSE: XPEV) unveiled its next-generation Iron humanoid robot, stunning audiences at an event with its natural, fluid movements and highly realistic catwalk demonstration.

Musk also took note of the Xpeng robot, commenting, "Not bad... Tesla and Chinese companies will dominate the market."

Earlier this month, Xpeng chairman and CEO He Xiaopeng announced the company had completed its first ET1 robot developed to automotive standards.

Beyond Xpeng, Chinese EV startups like Li Auto (NASDAQ: LI, HKG: 2015) and traditional automakers including Chery (HKG: 9973) are also developing robots.