Tesla Optimus: Transforming Factory Automation Globally

Tesla Retires Model S and Model X: The End of an Era and the Rise of AI

feb 4,2026,By lan

Tesla CEO Elon Musk officially announced the end of Model S and Model X production during a Wednesday earnings call. These premium vehicles helped Tesla transform from a struggling startup into a global powerhouse.

However, as the company faces declining profits and vehicle sales, this decision marks a major strategic shift. These models currently account for only 3% of global deliveries. Production is expected to wind down within the next quarter.

Financial Pressures and Market Shifts
From Cars to Humanoid Robots
The Vision for Cybercab and Robotaxis
Strategic Investments and Market Outlook

1. Financial Pressures and Market Shifts

Tesla is navigating a period of significant financial and sales turbulence. In the final quarter of 2025, adjusted income fell by 16%. Even more striking, net income plummeted by 61% for the quarter.

The company also saw its largest year-over-year sales drop. By the end of 2025, annual profits were just 30% of their 2022 peak ($12.6 billion). External factors have intensified these challenges:

Global Competition: In January 2025, BYD officially overtook Tesla as the world’s top EV maker.
Tax Credit Losses: The expiration of the $7,500 federal tax credit slowed US sales.
Political Fallout: Musk’s political involvement led to protests at dealerships, alienating some core buyers.

Financial Metric	Performance Impact (2025)
Quarterly Net Income	Down 61%
Annual Net Income	Down 46% ($3.3 Billion loss)
Model S/X Sales Share	3% of Global Total

2. From Cars to Humanoid Robots

The Fremont factory in California will undergo a massive transformation. Tesla plans to use the space currently dedicated to Model S and X to build Optimus humanoid robots.

This move highlights Musk's plan to move beyond traditional car manufacturing. Tesla is now betting its future on Artificial Intelligence. To fuel this, the company has agreed to invest $2 billion into xAI.

This investment aligns with shareholder goals to maximize company value. Last year, investors approved a record-breaking pay package for Musk. To earn it, he must significantly increase Tesla's market capitalization over the next decade.

3. The Vision for Cybercab and Robotaxis

The Cybercab is the next major pillar for Tesla. Musk predicts this two-seater, pedal-less vehicle will outsell all other Tesla models combined.

Tesla aims to expand its autonomous ride-hailing service to seven new markets by early 2026. While competitors have operated driverless fleets for years, Tesla recently achieved a milestone. The company recently launched an unmonitored Robotaxi service in Austin, removing safety drivers for the first time.

2026 Goal: 25% to 50% of the US covered by FSD (pending regulatory approval).
Target Market: High-volume autonomous transportation.
The Challenge: Relying on declining EV profits to fund the expensive AI pivot.

4. Strategic Investments and Market Outlook

Analysts view the discontinuation of Model S and X as a logical step. These models have been low-volume products for years. Focusing on Model 3, Model Y, and high-growth robotics is seen as a smarter use of resources.

The market has reacted with cautious optimism. Tesla's stock rose about 2% in after-hours trading following the announcement. Investors are weighing the immediate financial reality against the massive potential of the Optimus and Robotaxi programs.