Last week, Tesla (TSLA) held its annual shareholder meeting, which garnered attention for the approval of CEO Elon Musk’s $1 trillion compensation. At that event, Musk also discussed the company’s physical artificial intelligence (AI) initiatives, including the Optimus humanoid and robotaxis. The Tesla CEO also talked about the possibility of building a “gigantic” fab factory to meet the soaring demand for chips that are powering the AI revolution.
Last week only, Xpeng Motors (XPEV) – which I have stated previously is the best contender to become the “Tesla of China” – held its AI day. The theme was physical AI, and the company discussed its Turing chips, unveiled its “most human-like” IRON humanoid (whose mass production is expected to commence by the end of 2026), launched its VLA 2.0 large model, and announced three robotaxi models. It further said that it has begun mass production of its flying car.
Following Xpeng Motors’ AI day, a Barron’s article talked about Xpeng going “full Tesla” – something I have long been talking about. But then, can Xpeng really be the “next Tesla?” Let’s explore.
BYD Looks Set to Surpass Tesla in EV Sales
To be sure, Musk has been all praise for Chinese companies over the last couple of years, and during the company’s Q4 2023 earnings call, he famously said, “I think if there are not trade barriers established, they will pretty much demolish most other companies in the world.” However, the billionaire wasn’t always a fan of Chinese EV companies, particularly BYD (BYDDY), and in 2011, he mocked the very possibility of the company becoming a competitor.
Fast forward to 2025, and BYD looks set to sell more EVs than Tesla after having previously surpassed it in terms of total deliveries (EVs and plug-in hybrids). Chinese EV companies, including BYD, Xpeng Motors, and Nio (NIO), are giving Tesla a tough fight not only in the Chinese market, but also globally, particularly in Europe. Despite the EU’s tariffs on Chinese EVs, BYD is outselling Tesla in the region.
Xpeng Motors Has Been Accused of Copying Tesla
Notably, in the past, Xpeng Motors has been accused of copying Tesla. From its website once being a “clone” of Tesla’s to the G6 bearing resemblance to Tesla’s best-selling Model Y, Xpeng Motors has faced allegations of mimicking its much larger rival. On a more serious level, Tesla sued a former employee for stealing its Autopilot source code and then bringing it to Xpeng Motors, which he subsequently joined.
As things stand today, in terms of autonomous driving, Xpeng’s driver-assist technology is regarded as among the best – if not the best – in China. At its AI Day, Xpeng Motors said that its autonomous driving software needs less human intervention than Tesla’s full self-driving. CEO Xiaopeng He said that he plans to visit the U.S. next month to compare the company’s autonomous driving system to Tesla’s FSD.
Can Xpeng Motors Give Tesla a Fight in Physical AI?
Physical AI is the next big thing as the U.S. and China battle it out for global dominance. These are, however, still early days, as we don’t know whether the demand for products like humanoid robots and services like robotaxis will be as large as projected. After all, U.S. EV demand turned out to be a lot less than experts once projected, and companies across the board have scaled back their EV plans. Even Tesla, which reported its first annual shipment decline last year, looks set to report a year-over-year fall in shipments in 2025.
Secondly, it is too early to call a winner in physical AI. In the EV industry, Tesla had a sort of first-mover advantage. It gave Tesla a literal home run in the U.S. EV industry – even though, to its credit, the company’s vehicles were received well by buyers and its manufacturing prowess impressed legacy players.
Given China’s backing of new-age companies in the EV and robotics industry, we can be quite sure that some Chinese companies will give Tesla a run for its money in physical AI. Could that company be Xpeng Motors? I would say it is quite likely, and am incrementally bullish on the stock following last week’s AI day.
On the date of publication, Mohit Oberoi had a position in: XPEV , NIO , TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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