Tesla will end production of its Model S sedan and Model X SUV as the company shifts focus away from traditional electric vehicles and toward robotics and artificial intelligence, CEO Elon Musk announced on Wednesday’s investor call. Musk told investors that production of both vehicles would be wound down next quarter, marking the clearest signal yet that Tesla’s long-running flagship models are being retired.
Musk said the Fremont, California factory currently used to build the Model S and X will be repurposed to manufacture Tesla’s humanoid Optimus robot. “It’s time to basically bring the Model S and X programs to an end,” he said, framing the move as part of a broader transformation of Tesla from an automaker into what he called a “physical AI company.”
The announcement came alongside Tesla’s latest quarterly earnings, which showed declining vehicle sales and revenue despite the company beating Wall Street profit expectations. Tesla reported earnings per share of $0.50 for the fourth quarter, above forecasts, even as total revenue fell 3 percent year on year. Automotive revenue dropped 11 percent in 2025, and vehicle deliveries declined 16 percent compared with the previous year, with Europe seeing especially weak demand.
Tesla executives emphasized that future growth would come from AI-driven products, including Optimus robots and self-driving Robotaxi services. Musk has repeatedly described Optimus as potentially “the biggest product of all time,” claiming it could eventually eliminate poverty. Tesla said it plans to begin producing Optimus before the end of 2026, with public sales targeted for 2027.
The company is also increasing its financial commitment to AI. Tesla disclosed that it recently agreed to invest $2 billion in xAI, Musk’s artificial intelligence startup, and its chief financial officer said capital expenditure would reach $20 billion, far exceeding many analyst expectations.
While investors responded positively in the short term, critics note that many of Tesla’s ambitious AI and robotics projects remain unproven and unprofitable. At the same time, some of the company’s existing products have struggled, including the Cybertruck, which saw sales fall sharply last year. Tesla is also facing intensifying competition from China’s BYD, which overtook it as the world’s largest electric vehicle maker in 2025 after posting strong sales growth.
The discontinuation of the Model S and X closes a chapter for Tesla’s earliest premium vehicles and underscores how decisively Musk is betting the company’s future on robotics and artificial intelligence rather than traditional car manufacturing.