Tesla Discontinues Model S and X to Focus on Optimus Robot Production

TLDR

• Tesla discontinues Model S and Model X after years of production at Fremont facility
• Factory lines will produce Optimus humanoid robots with target of 1 million units annually
• Luxury models represented just 3% of Tesla’s total vehicle deliveries in 2025
• Third generation Optimus robot launches Q1 2026 as first mass production design
• Tesla posted first-ever annual revenue decline as EV competition intensifies globally

Tesla announced the end of Model S and Model X vehicle production on Wednesday during its fourth-quarter earnings call. CEO Elon Musk said the company will convert manufacturing lines at its Fremont, California facility to build Optimus humanoid robots.

Tesla, Inc., TSLA

The Model S sedan first rolled off production lines in 2012. Tesla launched the Model X SUV in 2015. Both vehicles carried premium pricing, with the Model S starting at $95,000 and the Model X at $100,000.

These luxury vehicles accounted for a small portion of Tesla’s business. Together, they represented only 3% of the company’s 1.59 million vehicle deliveries last year. The more affordable Model 3 and Model Y dominated sales at 97% of total deliveries.

Tesla has cut prices on Model S and X in recent years. Increased competition in the global electric vehicle market forced the company to adjust its pricing strategy. The Model 3 now starts at $37,000, while the Model Y begins at $40,000.

Company Reports First Annual Revenue Decline

Tesla revealed its first annual revenue decline on record in Wednesday’s earnings report. Sales decreased in three of the last four quarters. The company introduced cheaper versions of the Model 3 and Model Y late in 2025.

Musk is shifting focus away from traditional electric vehicles. The CEO wants to emphasize driverless cars and humanoid robots. Tesla currently generates virtually no revenue from these future-focused products.

Fremont Factory Gets Robot Production Line

The Fremont facility will receive a complete production overhaul. Musk said Tesla plans to install a 1 million unit per year manufacturing line for Optimus robots. The humanoid robot requires an entirely new supply chain with no overlap from automotive production.

Tesla will increase employment at the Fremont location. The company expects higher total output from the facility after the conversion.

The automaker plans to reveal the third generation Optimus robot in the first quarter of 2026. Tesla described this version as its first design built for mass production. Musk acknowledged the robot remains in research and development stages.

Tesla envisions Optimus as a bipedal robot capable of performing various tasks. The company sees potential applications from manufacturing work to childcare services.

Musk addressed Tesla’s artificial intelligence chip development during the call. The company is creating fifth-generation AI processors known as AI5 chips. Tesla currently uses both Nvidia processors and its own chips for AI training.

The CEO stated Tesla won’t sell chips externally until it secures enough supply for its vehicles and robots. He emphasized that AI chips are critical for Optimus functionality. Tesla plans to build its own chip manufacturing facility but not in 2026.

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