European companies are scrambling to establish a competitive position in physical AI — the fusion of artificial intelligence with robotics and industrial machinery — as China and the United States consolidate early leads in the sector. Industry insiders have warned that failure to build a viable continental industry could accelerate Europe's deindustrialisation, compounding economic pressures already weighing on the region.

A continent playing catch-up

The scale of the challenge was on full display at Machina, an inaugural one-day summit held in Paris on Tuesday, 8 July 2026, billed as Europe's leading dedicated event for the physical AI and humanoid robotics industry. The main stage told its own story: the majority of presenting companies were headquartered in the United States, with European firms accounting for only a small fraction of the speaker line-up.

'You see China and the US … because of AI … typically they are considered the leaders, but do not count out Europe,' said David Kehr, president of Humanoid Robotics, a division of German firm Schaeffler Technologies.

Schaeffler's strategic pivot into physical AI

Traditionally a supplier of automotive and industrial components, Bavaria-based Schaeffler Technologies entered the humanoid robotics sector in January 2026 through a partnership with UK start-up Humanoid. Under the arrangement, Schaeffler supplies actuators — the mechanical joints and motors that drive a robot's movement — while planning to deploy Humanoid's AI models across its own manufacturing facilities.

The move signals a broader pattern among legacy European industrials seeking relevance in an AI-driven manufacturing era, leveraging deep hardware expertise to compensate for relative software and model-training deficits.

Why it matters: deindustrialisation risk

Industry insiders at the summit warned that Europe risks further deindustrialisation if it cannot build a self-sustaining physical AI ecosystem. The concern is structural: without competitive domestic humanoid and robotics firms, European manufacturers may become dependent on systems developed in China or the US, ceding both economic value and strategic autonomy.

The stakes extend beyond individual companies. Physical AI is increasingly viewed as foundational infrastructure for next-generation manufacturing, logistics, and industrial automation.

The regulatory tightrope

Speaking at Machina, Kehr identified safety standards and faster training speeds as the sector's primary technical hurdles. He argued that Europe has a genuine opportunity to shape global safety frameworks — a domain where the continent has historically wielded outsized regulatory influence. However, he cautioned that policymakers must strike a careful balance, warning that overly burdensome regulation must not 'stifle' the European humanoid and physical AI market.

What's next

The Machina summit underscores a growing consensus that the window for Europe to carve out a meaningful role in physical AI is narrowing. Partnerships like Schaeffler–Humanoid represent one model — marrying established hardware supply chains with agile AI start-ups — but scaling such collaborations to match the state-backed momentum of Chinese players such as AgiBot and Unitree Robotics, or well-capitalised US firms like Apptronik, remains the central challenge. How European regulators respond to industry calls for a lighter-touch framework will likely determine whether the continent becomes a meaningful competitor or a captive market.