Tesla Kills Model S and X to Build Million Robots Per Year

After 12 years as Tesla's flagship models, the Model S and Model X are getting what CEO Elon Musk calls "an honorable discharge." The announcement came during Tesla's fourth-quarter earnings call on Wednesday, marking the end of an era for the luxury electric vehicles that helped establish Tesla as a premium automaker.

"If you're interested in buying a Model S and X, now would be the time to order it," Musk said, essentially announcing a clearance sale for Tesla's most expensive models.

The Numbers Don't Lie

The decision reflects harsh market realities. Of Tesla's 1.59 million deliveries last year, the Model S and X accounted for just 3% of sales. The remaining 97% came from the more affordable Model 3 (starting around $37,000) and Model Y (around $40,000).

Meanwhile, the Model S starts at about $95,000 and the Model X at $100,000 – more than double the price of Tesla's volume sellers. Even after Tesla slashed prices across its lineup to compete with growing EV competition, the luxury models couldn't find their footing in an increasingly price-conscious market.

Tesla also reported its first annual revenue decline on record, with sales falling in three of the past four quarters – a stark reminder that even the EV pioneer isn't immune to market pressures.

From Cars to Robots: Tesla's Billion-Dollar Bet

The Fremont factory production lines that once built Model S and X vehicles will now churn out something entirely different: 1 millionOptimus humanoid robots per year. Musk described this as a complete overhaul, noting that "there's really nothing from the existing supply chain that exists in Optimus."

The Optimus robot represents Tesla's ambitious vision of bipedal, intelligent machines capable of everything from factory work to babysitting. Tesla plans to unveil the third generation of Optimus this quarter – the first design intended for mass production.

"We expect to boost headcount at the Fremont facility and to significantly increase output," Musk said, suggesting the robot production will be more labor-intensive than car manufacturing.

The Bigger Picture: Tesla's Identity Crisis

This move signals Tesla's broader strategic pivot away from traditional EVs toward autonomous vehicles and robotics – sectors where the company currently generates virtually no revenue. It's a high-stakes gamble that raises fundamental questions about Tesla's identity.

For investors who bought Tesla stock believing in its EV dominance, the shift toward unproven technologies like humanoid robots represents both opportunity and risk. The company is essentially betting its manufacturing capacity on products that don't yet have established markets.

The timing is also telling. As traditional automakers flood the EV market with competitive alternatives, Tesla is choosing to retreat from segments where it faces direct competition and double down on moonshot projects where it can define the rules.

Market Implications: Winners and Losers

Tesla's exit from the luxury EV segment creates opportunities for competitors. Mercedes EQS, BMW iX, and Audi e-tron GT now face less competition in the $100,000+ electric luxury market. For consumers who wanted a high-end American EV, options just became much more limited.

The robotics pivot also puts Tesla in direct competition with established players like Boston Dynamics, Honda, and emerging Chinese robotics companies. Unlike the EV market where Tesla had a significant head start, the humanoid robot space is wide open – and largely theoretical.