Tesla Shifts Focus to AI and Robotics, Ending Model S and X Production

Musk announces Tesla will convert Fremont factory to manufacture Optimus humanoid robots, as company reports first-ever drop in annual revenue.

Jan. 29, 2026 at 5:31am

Got story updates? Submit your updates here. ›

Tesla CEO Elon Musk announced the company will end production of its premium Model S and Model X electric vehicles and convert its Fremont, California factory to manufacture the upcoming Optimus humanoid robots. Musk said Tesla's long-term goal is to produce 1 million Optimus units at the California plant, as the company shifts its focus towards AI and robotics amid declining EV sales.

Why it matters

Tesla's pivot away from its flagship sedan and SUV models signals a major strategic shift for the company, as it looks to capitalize on the growing market for advanced robotics and AI-powered technologies. This move comes as Tesla reports its first-ever decline in annual revenue, underscoring the need for the company to diversify beyond its core electric vehicle business.

The details

In Tesla's Q4 2025 earnings report, Musk announced the company will end production of the Model S and Model X, and convert its Fremont factory to manufacture the Optimus humanoid robot. Musk said the long-term goal is to produce 1 million Optimus units at the California plant. The decision to shift towards AI and robotics comes despite Tesla's investors having a lukewarm response to the company's $2 billion investment in Musk's xAI artificial intelligence firm last year.

  • On January 16, 2026, Tesla announced a $2 billion investment in xAI, Musk's AI company.
  • In Tesla's Q4 2025 earnings report released on January 29, 2026, Musk outlined the company's plans to end Model S and X production and convert the Fremont factory to manufacture Optimus robots.

The players

Elon Musk

CEO of Tesla, who announced the company's strategic shift towards AI and robotics, including the end of Model S and X production and the goal to manufacture 1 million Optimus robots.

Tesla

An American electric vehicle and clean energy company that is now pivoting its focus towards AI and robotics, as it reports its first-ever decline in annual revenue.

xAI

Musk's artificial intelligence company, which recently received a $2 billion investment from Tesla as part of the automaker's shift towards AI-powered technologies.

Got photos? Submit your photos here. ›

What they’re saying

“That is slightly sad, but it is time to bring the S and X programs to an end and shift to an autonomous future.”

— Elon Musk, CEO, Tesla

“Tesla is products and services that bring AI into the physical world. Meanwhile, xAI is developing leading digital AI products and services, such as its large language model (Grok).”

— Tesla

What’s next

Tesla plans to begin production of the Optimus humanoid robot at its Fremont factory, with a long-term goal of manufacturing 1 million units.

The takeaway

Tesla's strategic pivot towards AI and robotics, including the end of its flagship Model S and X production, signals the company's ambition to diversify beyond electric vehicles and capitalize on the growing market for advanced automation and AI-powered technologies.