Tesla is discontinuing production of its Model S and Model X vehicles and will repurpose its Fremont, California factory for the manufacturing of Optimus humanoid robots, CEO Elon Musk announced during the company’s fourth-quarter earnings call, CNBC reports.

“It’s time to retire Model S and X with honor. If you’re interested in buying one, now is the time to place an order,” Musk said.

After the original Roadster, these two models are Tesla’s oldest. Model S entered production in 2012, followed by Model X in 2015.

Recently, Tesla has significantly cut prices across its lineup amid rising global competition in the electric vehicle sector. The Model S now starts at $95,000, while the Model X begins at $100,000. More affordable versions of the Model 3 and Model Y, introduced in late 2025, cost approximately $37,000 and $40,000, respectively. These two models accounted for 97% of Tesla’s 1.59 million vehicle sales.

In its earnings report, Tesla announced its first-ever annual revenue decline, with sales falling in three of the past four quarters. Against this backdrop, Musk is shifting investor focus toward autonomous driving and robotics, sectors in which the company aims to expand aggressively.

Optimus Takes Center Stage

Optimus is Tesla’s bipedal humanoid robot designed to perform a wide range of tasks — from factory labor to household assistance and childcare. Tesla plans to unveil the third generation of Optimus in Q1 2026, with mass production as the goal. Musk said the Fremont production line will be capable of manufacturing up to 1 million Optimus robots per year.

“This is an entirely new supply chain. There are essentially no shared components with our cars,” Musk noted.

The initiative will also involve workforce expansion and a major production ramp-up.

Tesla Invests $2 Billion in xAI

Alongside its earnings report, Tesla disclosed a $2 billion investment in xAI, another Musk-founded company. The funding is part of a $20 billion financing round announced earlier in January.

“The investment was made on market terms alongside other investors,” Tesla stated.

xAI develops the Grok chatbot and has recently faced regulatory scrutiny over controversies surrounding the generation of explicit deepfake content. Tesla currently integrates Grok into some in-vehicle infotainment systems and confirmed a framework agreement between the two companies to explore broader AI collaboration opportunities.

Conclusion:

By pivoting away from legacy vehicle models toward humanoid robotics and AI, Tesla is signaling a major strategic shift — one that could redefine its role from automaker to full-scale robotics and artificial intelligence powerhouse.