Musk Revolutionizes Tesla: Introduces Walking Machines Over Cars
Tesla is embarking on a transformative journey by phasing out its Model S and Model X vehicles. This decision was announced by CEO Elon Musk during the Q4 2025 earnings call. The company will repurpose its Fremont factory to focus on mass production of humanoid robots, specifically the Optimus robot. This marks a dramatic change from Tesla’s origins as a premium electric vehicle manufacturer.
Musk’s Vision for Tesla’s Future
Elon Musk described Tesla’s pivot as a transition into a “physical AI company.” This shift aims to emphasize automation and robotics, positioning Tesla beyond traditional automotive roles. The Model S, launched in 2012, and Model X, introduced in 2015, were once symbols of the electric vehicle revolution. However, they now account for only a small fraction of Tesla’s overall sales.
End of an Era for Model S and Model X
- Production of Model S and Model X to cease in Q2 2026.
- Fremont factory will be fully retooled to manufacture the Optimus robot.
- Goal to produce one million units of Optimus annually.
Musk emphasized the need to bring the Model S and X programs to “an honorable end.” The upcoming Optimus robot is designed to handle tasks that are “unsafe, repetitive, or boring.” This strategic shift reflects Tesla’s response to changing market dynamics and competitive pressures.
Declining Sales Amid Rising Competition
Tesla’s Q4 2025 earnings revealed a concerning trend. The company faced a 3% year-over-year revenue decline, marking its first annual drop ever. Specifically, automotive revenue fell by 11%, and global vehicle deliveries dropped by 16% in the last quarter. Musk’s CFO, Vaibhav Taneja, attributed these declines to reduced demand, particularly in Europe.
Impact of Model S and X Production
- The Model S and X represented only 3% of Tesla’s total vehicle production in 2025.
- Combined deliveries of these models barely exceeded 50,000 units, far below the factory’s capacity.
In contrast, BYD of China has overtaken Tesla as the leading global electric vehicle manufacturer, highlighting a shift in industry dynamics.
Investment in Robotics and AI
As Tesla evolves, significant investments are planned in robotics and artificial intelligence. The company intends to launch the first mass-production version of the Optimus robot, referred to as Optimus 3, by the end of this year, with public sales slated for 2027.
Financial Commitment to Innovation
- Projected capital expenditures for 2026 to surpass $20 billion.
- Funding will support Optimus production and a new domestic chip manufacturing facility.
- Additionally, Tesla has invested $2 billion in xAI, Musk’s AI endeavor.
This shift signifies Tesla’s transformation from a traditional automotive firm to a pioneering robotics company. For Musk, the future is focused not on luxury vehicles but on creating intelligent machines capable of learning and adapting to the environment. “It’s part of our overall shift to an autonomous future,” he stated.
