Tesla to Stop Production of Models S and X, Convert Fremont Factory to Make Robots

Elon Musk announces major shift as Tesla's annual profit plunges to lowest level since pandemic

Jan. 29, 2026 at 12:55am

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Tesla CEO Elon Musk announced the company will be closing down production of its Models S and X vehicles in the second quarter of this year and converting its Fremont, California factory to produce Optimus robots instead. The move comes as Tesla's annual profit plunged 46% to $3.8 billion, its lowest level since the pandemic five years ago, as the EV maker lost its title as the world's biggest electric vehicle manufacturer to a Chinese rival and faced boycotts that hammered sales.

Why it matters

Tesla's shift away from its flagship sedan models and towards robot production signals a major strategic pivot for the company as it grapples with declining profits and market share. The decision raises questions about Tesla's long-term commitment to its core automotive business and whether the company can successfully transition to a new focus on robotics and autonomous driving technology.

The details

Tesla reported a 61% drop in net income for the fourth quarter of 2025 to $840 million, or 24 cents per share. Excluding one-time charges, net income was 50 cents per share, still better than analysts' forecasts of 45 cents. However, Tesla's gross profit margins improved to 20% in the quarter, up from 16% a year earlier. Musk said Tesla would be closing down production of its Models S and X in the second quarter and converting its Fremont factory to produce the company's Optimus robots. The move comes as Tesla lost its title as the world's biggest electric vehicle maker to a Chinese rival and faced boycotts that hurt sales.

  • Tesla reported its full-year 2025 results on January 29, 2026.
  • The company plans to close down production of the Models S and X in the second quarter of 2026.
  • Tesla intends to convert its Fremont, California factory to produce Optimus robots in the coming year.

The players

Elon Musk

CEO of Tesla, who announced the company's plans to stop production of the Models S and X and convert the Fremont factory to make robots.

Tesla

An American electric vehicle and clean energy company that has been the world's leading EV maker, but is now facing declining profits and market share.

Optimus

Tesla's humanoid robot that the company plans to produce at its Fremont factory.

Sam Abuelsamid

An analyst at Telemetry who said Tesla's aging product lineup and Musk's political involvement have hurt the company's brand.

Seth Goldstein

A Morningstar analyst who was encouraged by Tesla's plans to roll out robotaxi service in several cities this year.

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What they’re saying

“They've got aging product that is less and less competitive as others manufacturers come out with new models, then there is the general brand destruction. Musk's involvement in politics has turned off customers.”

— Sam Abuelsamid, Analyst, Telemetry

“Tesla's ability to show improving profitably was a surprise. I think that is the reason the stock is up now.”

— Seth Goldstein, Analyst, Morningstar

What’s next

Tesla plans to aggressively expand its robotaxi service to more than 30 cities by the end of 2026, according to Wedbush Securities analyst Dan Ives.

The takeaway

Tesla's shift away from its flagship sedan models to focus on robots and autonomous driving technology represents a major strategic pivot for the company as it grapples with declining profits and market share. The move raises questions about Tesla's long-term commitment to its core automotive business and whether the company can successfully transition to a new business model centered on emerging technologies.