AI Toys Are Booming in China — and Returning at a Rate Above 50%

October 18 — According to a report by Tech Planet, AI toys have been booming lately. Ministry of Industry and Information Technology data puts China’s AI toy market at 29 billion yuan in 2025, and it is expected to reach 34.2 billion yuan in 2026. Taobao’s 2025 figures show that sales of AI toy products grew by more than 1,600% year on year. Yet investment across the sector is cooling sharply, products are highly similar and return rates stay high.

One person working in the industry said that in first-tier cities the decision to buy an AI toy leans towards investing in education or trying out new technology, and prices can reach a thousand yuan or even ten thousand; parents study the model’s capabilities, the quality of conversation and the educational content. In lower-tier markets the logic is simpler: cheap, able to talk with the child, and better than an ordinary toy.

At present, giving gifts has become the main reason to buy an AI toy. After this year’s National Day holiday, some manufacturers disclosed figures showing that sales in the first half of the year had already exceeded the whole of last year. In Dongguan, Yiwu and other places with strong toy supply chains, some merchants have made a fortune.

But a large number of brands chasing quick money are also pouring into the sector, and behind the short-term explosive growth, repeat purchases and user experience have not kept up. Besides being highly similar, high return rates remain a problem, and soon after the novelty wears off, many AI toys end up gathering dust on a desk.

Industry reports show that the return rate for AI toys has stayed above 50% all year. On e-commerce platforms such as Taobao, JD and Pinduoduo, some collectible-toy companies allow returns only under conditions — once a product is connected and activated, it can no longer be returned. But that also pushes sales down.

Tech Planet notes that, in business-model terms, the moats for an AI toy are the model’s interaction capability, control over connectivity and computing costs, and the subscription-service ecosystem. Today a price war has become the most direct signal, while the final form of the AI toy is still being explored, and the industry is waiting for a turning point.