Inovance Rides AI-Driven Automation Boom to 36% Segment Growth While Automotive Unit Bleeds on Tax Hit and Stalled Price Talks
Half-year earnings call, August 31, 2026
Shenzhen Inovance Technology delivered a first half that management itself described as a study in contrasts: a general automation business firing on all cylinders thanks to AI-driven capital spending, and a new-energy-vehicle powertrain unit weighed down by raw material inflation and a one-off tax hit. Board Secretary Junen Song used the company's half-year call to walk investors through both sides of that ledger, while reaffirming full-year guidance of 10% to 30% revenue and net profit growth despite what he called a "K-shaped economic divergence" in China's industrial economy.
Price Hikes Are Offsetting Raw Material Inflation, With More Coming
The most actionable disclosure on the call was Inovance's decision to raise prices across control systems, servos, inverters and industrial robots in the first half, explicitly framing this as an "anti-involution" strategy against China's chronic price-war dynamics. Song said the move successfully offset rising costs for rare earth, aluminum and electronic materials, and confirmed further price increases are planned for the second half as PCB, chip and IGBT costs also start climbing. Management was clear that price increases contributed only marginally to the 40%-to-50% second-quarter revenue growth, with the real driver being order volume, but the pricing action is credited with lifting Q2 gross margin by 0.43 percentage points quarter-on-quarter. Song also disclosed an unusual tactic: prepaying suppliers to lock in scarce raw materials, even at a cash flow cost, in order to capitalize on extended delivery times at foreign competitors. "This might affect our cash flow, but it doesn't matter because in the longer term, this is a great opportunity for us to replace the market share of foreign competitors," he said.
General Automation Beats Expectations, But Momentum Set to Cool
General automation revenue rose 36% year-on-year to CNY 11 billion, described by Song as "beyond expectation" and the primary support for first-half results. He attributed the strength to overlapping tailwinds: AI capital investment, a self-sufficiency push in core equipment, and rising exports of Chinese-made automation gear as domestic OEMs gain global competitiveness in categories like plastic injectors and air compressors. Small-PLC market share climbed to roughly 14.6% from 9%-to-10% a year ago, with Japanese competitors losing share, a trend Song expects to extend into mid- and large-sized PLCs over time given safety and programmability advantages Inovance is building through its industrial software stack. July order growth ran around 30%, but Song flagged a deceleration risk into August as process industries, including metallurgy, non-ferrous metals and chemicals, showed weaker investment against a tough prior-year base. He declined to commit to a specific second-half growth number, only cautioning that repeating Q2's 40%-to-50% pace is unlikely.
Automotive Unit Swings to Pressure on Tax Charge and Two Underperforming Key Accounts
Inovance's NEV powertrain business grew just 4% to CNY 9.4 billion, hurt by a domestic NEV sales decline near 10% and unresolved price negotiations with automaker customers that delayed deliveries. Song was unusually direct about the drivers of automotive profitability pressure, disclosing a CNY 120 million tax charge in the first half that, absent which, the unit would not have posted a loss. He also acknowledged that one or two previously strong key accounts underperformed this year, compounding the hit. Notably, Inovance's own NEV clients aren't benefiting from China's export boom, since major exporters like BYD are not customers, meaning the company missed the export-led production upside that masked weak domestic sales industry-wide. Song expects the price pass-through negotiations to get easier in the second half and beyond as more customers accept cost-sharing arrangements, and pointed to overseas OEM electrification and a nascent intelligent chassis business, which already generated over CNY 100 million in sales, as multi-year offsets. His outlook: "Next year and the year after the next year, I believe that definitely, it is going to be less stressful than 2026."
AI Strategy Is Deliberately Narrow: Vertical Small Models, Not Foundation Models
Song used multiple analyst questions to clarify Inovance's AI positioning, and the message was consistently modest in scope. The company is not building large language models itself, instead licensing third-party foundation models and layering proprietary manufacturing data on top to train smaller, vertical-specific models for tasks like production line health checks and PLC auto-coding. Its iFG platform, still under construction, is designed to let both Inovance and its customers build AI agents on top of this data layer. Song was candid about the limits of current capability: "the AI functions are not as capable as you probably have imagined, but it's a progressive and gradual process." He emphasized a pragmatic philosophy that eschews broad claims: "In industrial scenarios, all the questions cannot be resolved by big model or large model. You have to train a smaller model with mechanism model... We don't have the broad and bold narratives, and we just want to be very pragmatic." AI-linked order contributions were quantified loosely: roughly CNY 1 billion from pan-3C industries (smart speakers, glasses), CNY 700 million from small machine tools, and CNY 500 million from HVAC tied to North American demand.
Humanoid Robotics Still Years From Commercial Scale, With a Selective Customer Strategy
On embodied intelligence, Song pushed back against near-term enthusiasm, estimating general-purpose humanoid applications remain three to five years from real implementation due to two unresolved bottlenecks: insufficient general-purpose large language model capability and inadequate motion control for fine manipulation tasks. Bionic arm components have completed client-side validation with a small batch already sold, and Inovance is deliberately choosing not to pursue bipedal robot components, favoring wheel-based and arm-based solutions for fixed industrial work stations instead. The company is also selective about which robotics customers it serves, prioritizing those it believes will survive long enough to generate meaningful volume. Song drew a direct parallel to the automotive supply chain's shakeout: "For some of the early comers, probably most of them have been phased out. And I believe that it's going to be the same situation for humanoid robots." He estimated roughly six months more of development before the value proposition on cost, reliability and function closes enough for volume orders to materialize.
Overseas Expansion and Emerging Businesses Show Selective Discipline
Emerging businesses, industrial robots and digital energy, grew 96% to CNY 1.5 billion combined, with industrial robots contributing about CNY 600 million and digital energy about CNY 800 million. Overseas energy storage orders rose roughly 100% and revenue roughly 200%, with 3.9 gigawatts of signed overseas projects and about CNY 120 million in confirmed overseas revenue so far. Song disclosed that Inovance deliberately walked away from CNY 1 billion to CNY2 billion of low-margin domestic energy storage orders to avoid price wars, a signal of margin discipline that investors should note given China's broader capacity glut in storage and solar-adjacent hardware. For its broader globalization push, tied to a planned Hong Kong listing, management set a target of 20% to 30% of overseas revenue eventually coming from general automation, arguing the overseas automation market is three times the size of the domestic one and offers superior margin quality versus elevator or automotive exports.