Elon Musk says Tesla ending Models S and X production as Tesla reports its first annual revenue decline on record

Tesla CEO Elon Musk, speaking on 28 January during the auto major's Q4 earnings call, announced that the electric vehicle (EV) maker is ending production of Model S and Model X. Calling the move an “honorable discharge”, he asked fans of the models to place orders before stocks run out, CNBC reported.

During the call, the world's richest man said Tesla will repurpose its Fremont factory in California, United States, to build the company's humanoid robots, Optimus, instead.

“It’s time to basically bring the Model S and X programs to an end with an honorable discharge. If you’re interested in buying a Model S and X, now would be the time to order it,” the billionaire stated.

Tesla's Model S, Model X — Why the halt?

Priced at around $95,000 and $100,000 for the base variants, Model S (2012) and X (2015), respectively, are among Tesla's oldest vehicles, along with the original Roadster, the report added. 

Over the past few years, Tesla has slashed prices of its cars amid increased global competition in the EV market. However, a chunk of the company's sales comes from the Model 3 ($37,000 base) and Model Y ($40,000 base), which together accounted for 97% or 1.59 million deliveries in 2025.

According to Reuters, Tesla saw its first annual decline in revenue, down around 3% to nearly $94.83 billion in 2025. Adjusted earnings per share of 50 cents in the fourth quarter topped Wall Street targets of 45 cents, according to LSEG data. Net income fell 61% to $840 million in the quarter, it said.

The company is expected to deliver 1.77 million vehicles in 2026 — up 8.2%, it added, citing data from Visible Alpha.

Tesla's Optimus humanoid robots gaining company focus?

Notably, the CNBC report said that Tesla is turning its focus to driverless cars and humanoid robots in the future — both areas have virtually no business or profits at present. The company envisions Optimus taking space in homes and factories alike and plans to unveil the third-generation design “meant for mass production” in this quarter, it added.

Speaking about plans for Optimus on the earnings call, Musk said that Tesla will replace the Model S and X production lines with Optimus and aim for a “1 million unit per year line” of units.

“Because it is a completely new supply chain, there’s really nothing from the existing supply chain that exists in Optimus. We will boost headcount at the Fremont facility, and will significantly increase output,” he added.

Elon Musk: Tesla needs to build factory for its own chips

Further, a Bloomberg report said Musk wants Tesla to build and operate what he is calling a “TeraFab” to manufacture semiconductors. 

“In order to remove the probable constraint in three or four years, we are going to have to build a Tesla TeraFab. A very big fab that includes logic, memory and packaging, domestically,” he said during the earnings call, it reported.

Tesla, the world’s most valuable automaker, has bet its future on artificial intelligence (AI), autonomous driving and robotics, projects with an insatiable need for chips. The company currently sources chips from Micron Technology Inc., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co (TSMC).

“That’s going to be very important to ensure we are protected against geopolitical risks. I think people may be are underweighting some of the geopolitical risks that are going to be a major factor in a few years,” he added.