Tesla is taking one of the boldest turns in its history, and it's not just about electric cars anymore. After years of dominating headlines as a pioneer of electric vehicles, the company is phasing out its Model S and Model X as part of a strategic shift toward robotics, autonomous systems, and artificial intelligence.
CEO Elon Musk confirmed the move during Tesla's Q4 2025 earnings call, saying the Fremont, California factory that once built those flagship vehicles will be repurposed to produce the Optimus humanoid robot at scale, with a long-term goal of manufacturing up to one million units a year. This change comes as Tesla reported its first annual revenue decline, even as earnings narrowly beat expectations.
The luxury EVs saw demand drop sharply compared with high-volume models like the Model 3 and Model Y, which now account for most deliveries. The Optimus program, also known as the Tesla Bot, has attracted both admiration and skepticism since its 2021 introduction. Musk has long suggested the humanoid could eventually be "more significant than [Tesla's] vehicle business", envisioning robots that perform dangerous, repetitive, or mundane tasks in factories and homes alike.
Third-generation Optimus designs, aimed at true mass production, are expected to begin assembly by the end of 2026 with potential public availability in 2027. Tesla is backing that robotic ambition with big bets across its business. The company plans to spend roughly $20 billion in capital expenditures in 2026 to scale factories, develop robotaxi and Autonomous systems, and expand AI infrastructure, including a $2 billion investment in Musk's xAI venture.
Despite market enthusiasm around AI, the venture has also sparked caution. Tesla's stock has dipped, and earnings metrics show pressure, leading some analysts to warn that the aggressive spending could strain cash flow before the robotics and Cybercab autonomous taxi businesses become cash-positive. Besides, Musk is widely recognized for a pattern of overpromising.
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