Tesla just made its boldest - and riskiest - strategic pivot yet. CEO Elon Musk announced Wednesday that the company is killing off its Model S and X vehicles and converting the entire Fremont production line to manufacture Optimus humanoid robots at a target rate of 1 million units per year. The bombshell came during Tesla's Q4 earnings call, where the company reported its first-ever annual revenue decline. Musk is essentially betting Tesla's oldest factory on a product that doesn't yet exist commercially, abandoning the premium EVs that helped build the brand's luxury credentials.
Tesla is pulling the plug on the vehicles that started it all. During Wednesday's fourth-quarter earnings call, Elon Musk announced the company is ending production of the Model S sedan and Model X SUV - giving the legacy vehicles what he called "an honorable discharge" - and repurposing their Fremont, California production lines to build Optimus humanoid robots instead.
"If you're interested in buying a Model S and X, now would be the time to order it," Musk told investors, according to the earnings call transcript. The comment sent shockwaves through the auto industry, marking the end of the two models that established Tesla as a serious luxury automaker over a decade ago.
The timing is jarring. Tesla just reported its first annual revenue decline on record, with sales falling in three of the past four quarters. Rather than doubling down on EVs, Musk is pivoting hard into robotics - a market where Tesla has exactly zero commercial presence. The company plans to unveil Optimus Gen 3 this quarter, calling it the "first design meant for mass production" in Wednesday's earnings release.
The numbers tell the story of why Model S and X are getting axed. The two vehicles accounted for just 3% of Tesla's 1.59 million deliveries last year, with the Model 3 and Y dominating at 97%. Tesla has been slashing prices on S and X as global EV competition intensified, eroding whatever premium margins these flagship models once commanded. The Model S launched in 2012, the X in 2015 - ancient by automotive standards.
