Tesla Ends Model S and Model X Production to Build Optimus Robots

TLDR

• Tesla is ending production of Model S sedan and Model X SUV, the company’s oldest vehicles after the Roadster
• The Fremont, California factory lines will be converted to produce Optimus humanoid robots with 1 million unit per year capacity
• Model S and X accounted for only 3% of Tesla’s 1.59 million deliveries in 2025
• Tesla will unveil third generation Optimus robot in Q1 2026, designed for mass production
• Company reported first annual revenue decline on record with sales falling in three of the past four quarters

Tesla CEO Elon Musk announced the end of Model S and Model X vehicle production during the company’s fourth-quarter earnings call on Wednesday. The automaker will convert its Fremont, California factory lines to manufacture Optimus humanoid robots instead.

The Model S sedan launched in 2012, making it one of Tesla’s oldest vehicles. The Model X SUV followed three years later in 2015.

Both models carried premium price tags on Tesla’s website. The Model S currently starts at about $95,000. The Model X begins at around $100,000.

Shift Away from Premium Models

The two luxury models represented a small fraction of Tesla’s total sales. Model S and X combined accounted for only 3% of the company’s 1.59 million deliveries last year.

Tesla’s Model 3 and Model Y vehicles proved far more popular with customers. These two models made up 97% of deliveries in 2025. The Model 3 now starts at about $37,000, while the Model Y costs around $40,000.

Tesla introduced more affordable versions of both vehicles late last year. Global competition in the electric vehicle market has increased in recent years. Tesla responded by slashing prices on its Model S and X vehicles.

The company reported its first annual revenue decline on record in Wednesday’s earnings announcement. Sales fell in three of the past four quarters.

Converting to Robot Production

Musk said Tesla will replace the Model S and X production line in Fremont with a 1 million unit per year line for Optimus. The humanoid robot requires a completely new supply chain. Nothing from the existing automotive supply chain carries over to Optimus production, according to Musk.

Tesla expects to increase headcount at the Fremont facility. The company plans to boost output at the location.

The company will unveil the third generation of Optimus in the first quarter of 2026. Tesla described this version as its first design meant for mass production. Musk said the humanoid robot remains in the research and development phase.

Tesla is developing Optimus as a bipedal, intelligent robot. The company envisions uses ranging from factory work to babysitting.

Musk discussed Tesla’s AI chip strategy during the earnings call. The company is working on fifth-generation AI processors called AI5 chips. Tesla uses both Nvidia chips and its own AI chips to train AI applications.

The CEO said Tesla won’t sell chips outside the company until it has enough for all self-driving cars and robots it wants to produce. Musk called AI chips essential for Optimus, stating the robot is “absolutely useless” without them. Tesla still plans to build a chip factory to ensure production capacity, though this won’t happen in 2026.

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