Chinese carmakers are investing heavily in humanoid robots as the industry looks beyond increasingly competitive electric vehicle sales for new sources of revenue.

XPeng has emerged as one of the most aggressive players. Its robotics business raised more than $900m in a funding round that valued the operation at more than $6.3bn, according to the company. The financing, led by IDG Capital and backed by investors including Tencent and Alibaba, will support development and mass production of its Iron humanoid robot.

The investment reflects a broader shift among Chinese vehicle manufacturers. BYD has unveiled plans for its own humanoid technology, while manufacturers including Chery, Changan, GAC, Li Auto, SAIC and Seres are also exploring robotics.

Car companies have several advantages as they enter the sector. Electric vehicles and humanoid robots rely on overlapping technologies, including batteries, sensors, motors, artificial intelligence and sophisticated manufacturing systems. That allows established manufacturers to adapt parts of their existing supply chains and engineering expertise.

The strategy also resembles Tesla’s attempt to develop Optimus into a large-scale commercial product alongside its vehicle business. But significant technical and commercial obstacles remain. Reuters reported that although China has made rapid progress in humanoid hardware, many robots still struggle with complex, adaptable factory work and other practical tasks.