Nvidia Faces Exodus of Chinese EV Makers as Local Chips Rise
China's leading electric vehicle manufacturers are aggressively replacing Nvidia Corp. chips with self-developed silicon, a strategic shift aimed at cutting costs and securing supply chains that is rapidly eroding the US chipmaker's dominance in the world's largest auto market.
XPeng recently unveiled four new models powered exclusively by its proprietary Turing chips, signaling a comprehensive departure from Nvidia’s hardware. Concurrently, NIO has begun transitioning its fleet to its in-house Shenji processor. NIO Chief Executive Officer William Li stated that the move allows for significant cost reductions, noting that a single self-developed chip can replace four of Nvidia's current-generation units.
The market impact is already visible. Nvidia’s share of the Chinese high-level intelligent driving chip market fell from 39% in 2024 to 25% in 2025. Delays in the mass production of Nvidia’s next-generation Drive Thor chip have further accelerated this migration, forcing major automakers to reshuffle product launch schedules and prioritize domestic alternatives.
While automotive revenue remains a minor fraction of Nvidia’s total earnings, the trend highlights the rapid technological maturation of Chinese competitors. As automakers seek to control their own "digital souls," Nvidia faces intensifying competition from local tech giants like Huawei Technologies Co. and specialized chipmakers such as Horizon Robotics.
The Push for Self-Sufficiency
The allure of Nvidia’s ecosystem is fading as Chinese automakers prioritize proprietary technology. At a recent launch event, XPeng Chairman He Xiaopeng declared that the world's best AI companies will inevitably choose self-developed chips. XPeng’s new Turing chip, which entered mass production in mid-2025, offers 750 TOPS (trillions of operations per second) of computing power—outperforming Nvidia’s delayed Thor chip and equivalent to three Orin-X units.
NIO is executing a similar strategy. Its 5-nanometer Shenji NX9031 chip, capable of over 1,000 TOPS, began shipping with the ET9 model in April 2025. From that point forward, all new NIO models have gradually switched to the internal chip. With NIO delivering approximately 200,000 vehicles in 2024—each previously equipped with four Orin-X chips—the shift represents a loss of over 700,000 chip orders for Nvidia in 2025 alone.
Beyond internal use, these proprietary chips are entering the broader market. XPeng’s Turing chip has reportedly secured a designation from Volkswagen AG, while NIO has begun licensing its Shenji technology. This comes as domestic suppliers gain ground; in November 2025, Nvidia’s installation share in China dropped to 47.7%, while Huawei and Horizon Robotics saw their shares rise to 13.4% and 10.2%, respectively.
Performance and Supply Chain Reliability
For years, Nvidia’s Orin-X was the industry standard for high-end EVs, used by brands like Li Auto as a key selling point. However, the chip’s six-year-old architecture is struggling to meet the demands of modern AI models, forcing automakers to use expensive multi-chip clusters to achieve necessary performance.
Nvidia’s successor product, Drive Thor, has failed to stem the tide due to execution issues. Originally slated for 2024, deliveries were pushed to August 2025, and the advertised computing power was revised down from 2,000 TOPS to 700 TOPS. These delays disrupted the roadmaps of key clients. Li Auto was forced to postpone its L-series model refresh from March to May 2025, while XPeng activated "Plan B" to use its own chips for the G7 Ultra instead of waiting for Thor.
Cost efficiency is another critical factor driving the exodus. In the mid-range market, Horizon Robotics’ J5 chip offers performance comparable to Nvidia’s Orin series at less than half the price. By 2024, the J5 had secured orders for over 20 models from major automakers including BYD Co. and SAIC Motor Corp.
Strategic Pivot to Software
Despite the market share erosion, the financial impact on Nvidia is currently limited. In the first three quarters of fiscal year 2026, automotive revenue totaled 1.745billion, accounting for just over 1147.8 billion total revenue, which is driven primarily by data center demand.
Recognizing the ceiling on hardware sales, CEO Jensen Huang is attempting to pivot Nvidia from a chip vendor to a comprehensive smart driving solution provider. This strategy included hiring former XPeng executive Wu Xinzhou in 2023 with the goal of dominating the supplier market within three years—a target that now appears out of reach.
At CES 2026, Nvidia shifted tactics again, releasing "Alpamayo," an open-source vision-language-action (VLA) model. The move aims to capture automakers lacking in-house R&D capabilities by providing a ready-made algorithm framework. However, industry reaction has been tepid. Experts question the utility of the model's 10 billion parameters for complex vehicle-based deployment. Even Tesla Inc. CEO Elon Musk was dismissive, stating on social media that while Nvidia provides useful tools, the auto industry itself has shown little progress using them.