“It’s time to bring the Model S and X programs to an end,” Elon Musk told investors on Tesla’s latest earnings call — and with that sentence the electric-car maker signaled a dramatic shift in its manufacturing map and corporate priorities.
Tesla will largely stop production of its long-running Model S sedan and Model X SUV next quarter and convert the Fremont production space that made them into a manufacturing line for Optimus humanoid robots. The decision, announced during the company’s earnings call, is as much symbolic as it is logistical: Tesla is leaning hard into AI and robotics as the engines of its next growth chapter.
From flagship cars to factory robots
The Model S (in production since 2012) and Model X (since 2015) have been halo vehicles for Tesla, but their sales have dwindled relative to the more affordable Model 3 and Model Y. For the full year 2025, Tesla delivered roughly 1.59 million Model 3 and Y vehicles but only about 418,000 units of the S and X combined, underscoring why management thinks reusing that floor space makes commercial sense.
Musk says the Fremont line will be repurposed to build the Gen 3 Optimus, a mass-production design that Tesla hopes can be scaled to as many as one million robots a year from that facility. The company aims to begin production in Fremont by the end of 2026 and — per previous Musk comments — sell Optimus to the public in the years after. He has described Optimus as a general-purpose, learn-by-observation machine that could be taught tasks through demonstration, speech or even video.
But the move comes as Tesla’s auto business softens. The company reported a rare decline in total revenue year-on-year and an 11% drop in automotive revenue in 2025, even as it beat analysts’ earnings-per-share estimates for the quarter. That financial squeeze helps explain why Tesla is emphasizing high-margin, AI-driven projects alongside its vehicle lineup. The pivot also comes paired with a $2 billion investment into Musk’s separate AI venture, xAI, information revealed in the same earnings materials.
What this means locally — and for owners
The Fremont mayor applauded Tesla’s choice of the Bay Area plant for the new Optimus line, framing it as a vote of confidence in the region’s advanced-manufacturing workforce and supplier base. Tesla says it expects to keep overall vehicle throughput at Fremont steady by streamlining lines and reallocating capacity; company officials told investors they do not plan mass layoffs as part of the conversion and may even hire more workers for robotics production.
Current owners of Model S and X need not panic: Tesla has pledged to continue support for existing vehicles, and Musk urged anyone who wants one to place an order while stock remains. Notably, the brand has already been constrained in some markets — sales of the S and X were halted in China in mid-2025 amid tariff complications tied to U.S.–China trade moves.
Between hype and the hard work of scaling
The pivot away from two of Tesla’s longtime products is a high-stakes bet on a future Musk has long promised — one where autonomy, AI and humanoid robots are core revenue drivers. Skeptics point to repeated optimistic timelines and underwhelming public demos of some Tesla initiatives; robotics at industrial scale is a different engineering and supply-chain problem than building cars.
Still, the broader conversation Tesla is trying to join — whether AI is nearing human-level capability and what commercially useful agents will look like — is happening across tech. Industry debates about human-level AI and the pace of progress are raging now, and the development of agentic systems is already reshaping product roadmaps elsewhere in the sector, from search and booking assistants to autonomous agents in logistics and services. For background on those wider debates, see the ongoing discussion about human-level AI and how companies are building agentic features into consumer products like booking tools that act on your behalf.
If Tesla can repurpose a storied auto line into a reliable robot factory, the company will have changed what it sells — and what a car company can be. If it can’t, the decision will be remembered as another ambitious detour in a decade of bold moves.