The BareStory
Tesla announced on Wednesday that it will cease production of its Model S and Model X vehicles to shift manufacturing focus toward humanoid robots. The decision was disclosed alongside the company’s fourth-quarter earnings report, which revealed Tesla’s first-ever annual revenue decline following an 8.6% drop in vehicle deliveries for the full year of 2025.
During the earnings call, CEO Elon Musk stated that production lines at the Fremont, California, factory will be converted to manufacture Optimus robots, with a goal of producing one million units annually. Musk described the move as an "honorable discharge" for the Model S and X, advising interested customers to place orders soon. The two luxury models have seen declining popularity, with the cheaper Model 3 and Model Y accounting for 97% of the company's 1.59 million deliveries last year. Tesla plans to unveil a third-generation Optimus design this quarter, which the company characterized as its first design meant for mass production.
The earnings report also confirmed that Tesla has agreed to invest approximately $2 billion in xAI, an artificial intelligence startup founded by Musk. The investment is part of a larger $20 billion financing round and is expected to be finalized in the first quarter of 2026. Tesla stated the deal was made on market terms and includes a framework to evaluate future collaborations.
The investment comes as xAI faces regulatory scrutiny in multiple jurisdictions. The European Commission, the California Department of Justice, and agencies in nations including France and Australia have initiated probes following reports that xAI’s Grok tool enabled the creation of non-consensual deepfake explicit images. Authorities in Malaysia and Indonesia have suspended the service until safeguards are implemented.
How it may affect me
As a U.S. reader:
Consumers seeking a new Model S or Model X must act quickly to place final orders before the company permanently ceases production of these luxury electric vehicles.
The manufacturing focus at the Fremont, California, facility will shift from cars to technology, with the company aiming to mass-produce one million humanoid robots annually.
Public funds in California are being utilized to investigate xAI regarding deepfake safeguards, a probe occurring alongside Tesla’s confirmed $2 billion investment in the startup.
Those shopping for Tesla’s most popular vehicles will see no change, as the Model 3 and Model Y accounted for 97% of deliveries and remain in production.
