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Tesla Ends Model S and X

Elon Musk confirmed Tesla will end production of the Model S and Model X in the second quarter of 2026, marking the conclusion of two of the company’s longest-running vehicles. The decision, announced during Tesla’s Q4 2025 earnings call on Wednesday, is part of a strategic pivot toward autonomous technology and robotics.

The Tesla CEO described the move as an “honorable discharge” for the models, which helped establish Tesla as a leader in the electric vehicle (EV) market since their launches in 2012 (Model S) and 2015 (Model X).

The Model S and Model X once served as Tesla’s flagship vehicles and were instrumental in early EV adoption in the U.S. and globally.

Production of these models has already been phased out in China and Europe since early 2025, with U.S. orders now being the final opportunity to purchase them.

Musk announced that the the Fremont, California factory will be retooled to mass-produce Optimus humanoid robots, with a long-term goal of 1 million units per year. Tesla is advancing its Cybercab robotaxi, set to begin production in April 2026. It will be a fully autonomous, two-seater vehicle with no steering wheel or pedals, designed to power a future robotaxi network.

Tesla plans to invest over $20 billion in capital expenditures in 2026, including a new “TerraFab” chip facility to produce AI chips domestically and expand production across energy storage, robotics, and battery manufacturing. The company also announced a $2 billion investment in xAI, Musk’s artificial intelligence company, reinforcing its broader AI ambitions.

Musk emphasized that Tesla is transitioning from a hardware-centric automaker to a “physical AI company”, integrating AI into robotics, energy systems, and autonomous transport.

The Optimus robot is entering its third generation, which Musk described as the first design meant for mass production. The robot currently performs basic factory tasks but is still in development.

Musk reiterated that Tesla’s future lies in autonomous driving, robotaxis, and humanoid robots, with the potential to significantly impact the U.S. economy and daily life. He expressed confidence in achieving “amazing abundance” through these technologies.

Tesla reported its first-ever annual revenue decline, down 3% to $94.8 billion in 2025. Vehicle sales fell 9% year-over-year, and EV deliveries dropped 16% in Q4. Despite this, the company beat Wall Street estimates for the quarter.

**Background and context**:

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**Long-term vision**:

Tesla Ends Model S and X

**Elon Musk announced on Tesla’s Q4 2025 earnings call on January 28, 2026**, that the company will permanently end production of its Model S and Model X vehicles, marking the conclusion of an era for Tesla’s flagship luxury electric sedans and SUVs.

**Key details from Musk’s announcement**:

- Production of the Model S and Model X will wind down in **Q2 2026**, with no further production after current inventory is sold.

- The **Fremont, California factory**, where both models have been built since 2012 and 2015 respectively, will be retooled to mass-produce **Tesla’s Optimus humanoid robots**.

- Musk stated: *“It’s time to basically bring the Model S and X programs to an end with an honorable discharge.”*

- The new production line aims to manufacture **up to one million Optimus robots per year**, with the **third-generation (Gen 3) Optimus**—designed for mass production—set to be unveiled in Q1 2026.

**Strategic shift behind the move**:

- Tesla delivered **1.59 million vehicles in 2025**, with the Model 3 and Model Y accounting for **97% of output**, while Model S and X combined totaled only **418,000 units**.

- Declining sales, especially after Tesla halted Model S and X sales in China due to import tariffs, underscored the strategic pivot.

- Musk emphasized a broader shift toward **autonomous driving, robotaxis (Cybercab), AI, and robotics**, calling the future “autonomous” and “AI-driven.”

- Tesla’s energy storage business generated a record **$12.8 billion in revenue in 2025**, and the company plans **over $20 billion in capital expenditures in 2026** for robotics, AI chips (TerraFab), and energy infrastructure.

**Future plans and implications**:

- The **Cybercab robotaxi** is slated to enter production in **April 2026**, with no steering wheel or pedals, fully autonomous.

- The **Roadster** is expected to debut in April, described as “something out of this world.”

- Musk confirmed **no layoffs** at Fremont; instead, Tesla plans to **increase headcount** and **maintain current vehicle throughput** for Model 3 and Model Y.

- The **Optimus robot** is designed to learn tasks by observation, verbal instruction, or video demonstration—aiming for general-purpose utility in homes and factories.

- Tesla also revealed a **$2 billion investment in Musk’s AI startup, xAI**, raising governance concerns among investors.

**Background context**:

- The Model S launched in 2012 as a breakthrough luxury EV and won Motor Trend’s Car of the Year in 2013.

- The Model X, introduced in 2015, was the first mass-produced SUV with falcon-wing doors.

- Both models are now outdated compared to newer platforms with advanced Full Self-Driving (FSD) capabilities.

- Tesla reported its **first annual revenue decline on record in 2025**, with $69.52 billion in revenue and net income down 46% to $3.79 billion.

This move signals Tesla’s transformation from an electric vehicle company to a **leader in AI, robotics, and autonomous systems**, with Optimus at the center of its long-term vision.