I play only on extreme. This time I had fast AI, but the same issue was there few versions back even on the slowest AI.
Maybe, but withdrawing when there is nowhere to be flanked unless enemy punches through your lines? I dont ask why it does it, all I know is it lets you surround cities basically for free making it real easy to defeat. Though I guess now that unification is no longer broken it might no longer be so easy to defeat nemesis by turn 30...
AI material superiority does not matter, does not matter if AI is retreating with double your army size or triple, zero times anything is still zero. All that matters is you can establish a defensive line + few units extra to grab that free land, which is very easy to do even early on. And then you just want few tanks to take that city. In my last game AI had more troops than me, and better tech, yet it was still retreating allowing me to make it half way to their city with no fights in less then 5 turns. Also note that I was not the one who started that war, though I did have 6 units in the area in case they invaded.
edit:
So I gave it another try, extreme difficulty, medium lava world with harsh resolution war setting, gave the AI more time to think. Currently have been in a war with a major who has 1 tech lvl more than me for some time now. Still have to see any resemblance of a battle line from them, they keep doing nothing but retreating, giving me free land, and their army composition is just criminally terrible. We have both had laser rifles and heavy battlesuit researched for quite a while, but 90 percent of enemy army is still heavy armor charged gauss infantry (with the odd one with laser rifle and heavy battlesuit mixed in), only a few artillery and less then 100 tanks mixed in. And those tanks are still using steel armor, so there is absolutely nothing to even challenge my small group of terribly designed light tanks with 50mm armor and 60mm gun that are steamrolling the enemy. And once again, I was not the one who started the war, the entire army I am fighting with did not even exist when I was DOWed upon, and it cost me no more then a single turn of resource production (not counting the useless thousands of robotic infantry that for some reason are mandatory in every single infantry oob, those cost 10 turns of high-tech production). But once again I must say the dev did a very good job with turn times, I was afraid with slower AI it would be unplayable once again, but it was not so. Now just to make the AI at least somewhat capable to provide at least some kind of challenge and we will have a real gem of a game here