Tesla CEO Elon Musk2025 Fiscal Year Earnings ConferenceDropping a bombshell, Elon Musk officially announced that it will essentially cease production of its flagship Model S and Model X vehicles next quarter. Musk stated, "It's time for the Model S and X to have an honorable discharge, as we are truly moving towards an automation-based future."
The production lines for these two models, which once cemented Tesla's position as a luxury electric vehicle manufacturer, will be emptied at the Fremont, California factory and are expected to be converted to produce Tesla's most anticipated vehicles.Optimus humanoid robot.
The stark sales disparity and the heavy blow of tariffs have led to the end of an era for flagship models.
The Model S debuted in 2012, and the Model X in 2015. Both were not only showcases of Tesla's technology but were also once the pinnacle of the electric vehicle industry. However, with the more affordable Model 3 and Model Y sweeping the globe, the luster of the Model S and Model X has gradually faded.
According to full-year data for 2025, the number of Model 3 and Model Y deliveries reached 158 million units, while the number of Model S and Model X deliveries was only 41.8 units. Furthermore, due to retaliatory tariffs imposed by US President Trump in the trade war, Tesla was forced to cease exporting these two US-made models to China as early as mid-2025, further squeezing their market share.
The Model S and Model X will continue to be sold until the inventory is depleted, and Elon Musk has promised that although the cars will no longer be sold, Tesla will continue to provide logistical support to existing owners.
Production lines are being repurposed for robots, with a target of producing one million Optimus units annually.
If car production stops, what will the factory do? The answer is: produce people.
During the conference, Elon Musk boldly declared that his long-term goal is to achieve an annual production capacity of 100 million Optimus robots within the existing production space for the Model S and Model X. He had just recently announced at the Davos Forum that Optimus would be available for general public purchase as early as the end of next year (2027).
Elon Musk has immense confidence in Optimus, having previously stated that it will become..."The greatest product in history"Its value will surpass that of a mobile phone, surpass everything. However, considering the Optimus's recent shaky performance in demonstrations, coupled with Elon Musk's infamous "Elon Time" track record of delays, this timeline may still be questionable.
Left hand to right hand? A massive $20 billion investment in xAI
Another highlight (or controversy) of the earnings call was Tesla's announcement that it had invested $20 billion in Elon Musk's AI company, xAI.
Despite shareholders suing Elon Musk in 2024 for a conflict of interest in creating xAI with Tesla, Musk has consistently emphasized that Tesla is an "AI company," not just a car manufacturer. With shareholders approving Musk's $1 trillion compensation package by the end of 2025 (on the condition that the company's market capitalization grow to $8.5 trillion), the investment deal seems to have passed smoothly.
Analysis of viewpoints
While the Model S and Model X didn't sell as well as the Model 3 and Model Y, they were indeed Tesla's "Halo Cars," representing Tesla's position in the luxury electric vehicle market. Discontinuing these two models signifies Tesla's complete transformation into a "mass market" brand in the automotive sector, while in the high-end market, it's betting everything on the yet-to-be-profitable Optimus robotics and Robotaxi.
This further confirms Elon Musk's core philosophy: he never wanted to be just a car company; he wanted an automation empire driven by AI and robotics. And cars are merely the first piece in this grand blueprint.
From a business perspective, it seems reasonable to gamble on a new product with a potential trillion-dollar market using an aging production line with shrinking profits. However, the problem lies in the fact that in the current fiercely competitive electric vehicle market, Tesla is abandoning its moat of high-end models. If robot mass production falls short of expectations, or if the implementation of AI autonomous driving is hindered, Tesla will face a period of revenue stagnation without new flagship hardware to support it.
However, there have been rumors in the market that Tesla will launch more affordable models targeting the entry-level market (the rumored Model A?). Perhaps the cancellation of the Model S and Model X models will reshuffle Elon Musk's original "SEXY" model lineup.
