Tesla drops Model X as Elon Musk bets future on AI and robotics

Tesla will discontinue production of its Tesla Model X SUV and Model S sedan, marking a major shift in the company’s direction as CEO Elon Musk pushes deeper into robotics and artificial intelligence.

Speaking during Tesla’s investor call on Wednesday, Musk confirmed the move, saying: “It’s time to basically bring the Model S and X programs to an end,” and adding, “We expect to wind down S and X production next quarter.”

Musk said the Fremont, California factory that currently produces the two vehicles will be converted to manufacture Tesla’s Optimus humanoid robot.

The announcement comes as Tesla faces slowing vehicle sales and declining automotive revenue. In its latest earnings report, the company described the past year as a “transition from a hardware-centric business to a physical AI company.”

Tesla reported earnings per share of $0.50 for the fourth quarter, beating Wall Street expectations of $0.45. Revenue reached $24.9 billion, slightly above forecasts.

Despite the earnings beat, Tesla’s automotive revenue fell 11 percent year over year in 2025, while fourth quarter vehicle deliveries dropped 16 percent, with weaker demand in Europe playing a major role.

Tesla shares rose briefly in after hours trading following the earnings release.

Musk has increasingly emphasised projects like Optimus robots and self driving Robotaxis as the company’s future growth engines. He has previously said Optimus would be the “biggest product of all time.”

Tesla plans to begin producing the robot before the end of 2026 and sell it to consumers in 2027.