Tesla is halting production of its Model S and X vehicles and repurposing its Fremont, California plant to manufacture humanoid robots named Optimus. This was announced by Elon Musk during a fourth-quarter earnings call, as reported by CNBC.
“The time has come to retire the Model S and X with dignity. If you’re interested in purchasing them, now is the time to order,” he said.
Following the original Roadster, these two models are the oldest in Tesla’s lineup. Sales of the Model S began in 2012, with the Model X following three years later.
Recently, the company has significantly reduced prices on new models amid increasing global competition in the electric vehicle sector.
The Model S starts at $95,000, while the Model X begins at $100,000. More affordable versions 3 and Y, introduced at the end of 2025, are priced at approximately $37,000 and $40,000 respectively. The latter accounted for 97% of the 1.59 million vehicles sold by the company.
In its earnings report, the company announced its first-ever annual revenue decline, with sales dropping in three of the last four quarters. In light of this, Musk is keen to shift investor focus to autonomous vehicles and robots—areas in which the firm is not yet active.
Optimus is a bipedal robot purportedly capable of performing any task—from factory work to childcare. In the first quarter of 2026, the company plans to unveil the third generation of the robot, designed for mass production.
Musk stated that the Fremont assembly line will enable the production of 1 million Optimus units annually.
“This is an entirely new supply chain. Optimus truly contains no [components from cars],” the entrepreneur said.
The initiative also includes plans to increase staff numbers and significantly boost production volume.
Investment in xAI
Alongside the earnings report, Tesla announced a $2 billion investment in another Musk venture—xAI.
The transaction was part of a $20 billion funding round announced earlier in January.
“The investment was made on market terms agreed with other investors,” the company stated in its fourth-quarter earnings report.
xAI is a leading AI startup behind the chatbot Grok. Recently, it has been under global regulatory scrutiny due to a scandal involving its ability to generate and publish explicit deepfake images on X based on real people’s photos.
Tesla includes Grok as a feature in some of its electric vehicles’ infotainment systems. In a new presentation to shareholders, company representatives stated that the firms have entered into a framework agreement to explore potential AI collaboration.
Earlier in January, Musk stated that artificial intelligence could surpass human capabilities as early as 2026.