Tesla is officially pulling the plug on its oldest premium vehicles, the Model S and Model X, as the company shifts its industrial focus toward building humanoid robots. CEO Elon Musk confirmed the move during Tesla’s Q4 2025 earnings call, revealing that the California-based Fremont factory will be repurposed for mass-producing the Optimus robot.
This marks a significant shift in strategy for Tesla, once known for making high-end electric vehicles that helped push EVs into the mainstream. With declining automotive revenues and increasing competition, Musk is now turning Tesla into what he calls a “physical AI company” focused on automation, robotics, and autonomy.
The Model S, introduced in 2012, and the Model X, which followed in 2015, played a foundational role in Tesla’s rise. They became iconic symbols of performance-driven electric mobility, helping the company transition from a niche EV startup to the most valuable automaker in the world. But according to Tesla’s latest sales figures, the two models now represent only a small fraction of the brand’s total output, while cheaper alternatives like the Model 3 and Model Y dominate deliveries.
A Factory Reimagined for Robots
The end of production for the S and X is set for the second quarter of 2026. Musk said during the investor call that Tesla would wind down production of both models next quarter and that “it’s time to bring the Model S and X programs to an end with an honorable discharge.” The Fremont plant, previously dedicated to manufacturing these two luxury vehicles, will be entirely retooled to assemble Tesla’s upcoming humanoid robot, Optimus.
According to Tesla, the long-term goal is to manufacture one million units of Optimus per year at the Fremont facility. Musk emphasized that this shift will increase headcount at the factory and that “there’s really nothing from the existing supply chain that exists in Optimus,” highlighting the radical overhaul underway. The Optimus robot is being designed as a bipedal machine capable of performing tasks that are “unsafe, repetitive or boring,” as noted in a company description reported by The Register.
Tesla ends Model S/X in Q2 2026, retools Fremont to build 1M Optimus robots yearly. © Shutterstock
Declining Sales and Growing Competition
Tesla’s Q4 2025 results confirmed that the company is going through a transition phase. The automaker posted a 3% year-over-year revenue decline, the first annual drop in its history. Automotive revenue specifically fell by 11% compared to the previous year, while global vehicle deliveries were down 16% in the fourth quarter alone. Tesla’s Chief Financial Officer, Vaibhav Taneja, attributed this partly to weaker demand in Europe.
According to CNBC, the Model S and X together accounted for just 3% of the company’s total vehicle production in 2025. Tesla no longer breaks down their exact sales figures, but estimates suggest that deliveries of these two models combined barely exceeded 50,000 units in 2025, significantly below the factory’s annual capacity of 100,000. In comparison, China’s BYD overtook Tesla as the largest global EV maker last year, increasing its own sales by 28%.
Tesla S and X sales fall in 2025 as revenue dips and BYD becomes top EV maker. © Shutterstock
Robots over Roadsters
As part of its AI-driven future, Tesla is investing heavily in robotics and autonomy. The company plans to roll out its first mass-production version of the Optimus robot, dubbed Optimus 3, later this year, with the goal of public sales beginning in 2027. “I’m confident that we’ll get to a million units a year in Fremont of Optimus 3,” Musk said on the earnings call.
This pivot to robotics also includes substantial spending. Tesla revealed that capital expenditures in 2026 are expected to exceed $20 billion. That budget will fund various projects, including the Optimus production lines and the new “TerraFab” chip facility aimed at domestic chip manufacturing. In addition, Tesla has made a $2 billion investment into xAI, Musk’s artificial intelligence startup.
The decision to terminate the Model S and X lines underscores Tesla’s transformation from a car company into a robotics and autonomy powerhouse. For Musk, the future lies not in luxury sedans but in machines that can walk, observe, and learn. “It’s part of our overall shift to an autonomous future,” he said.
