Tesla has announced a major change that marks the end of an era for the company. The electric vehicle maker will stop producing its long-running Model S and Model X vehicles. At the same time, it will convert production lines at its Fremont, California, factory to manufacture Optimus humanoid robots. The announcement highlights a sharp shift in priorities as the company moves attention away from some traditional electric cars and toward advanced robotics.
The decision was shared during the fourth-quarter earnings call of Tesla. It reflects changing market conditions, slowing revenue growth, and a new focus on emerging technologies. While the move may surprise many car buyers, it fits into a broader strategy that emphasizes automation and robotics over premium electric sedans and SUVs.
End of an era for Model S and Model X
The Model S and Model X are among the oldest vehicles Tesla has ever produced. After the original Roadster, these two models helped shape the brand’s image and popularity. The Model S sedan first went on sale in 2012. It was followed by the Model X SUV three years later. At the time, both vehicles were seen as groundbreaking. They offered long driving ranges, strong performance, and a new vision for electric mobility.
Over the years, however, the global electric vehicle market has changed rapidly. Competition has increased, and many carmakers now offer a wide range of electric models at lower prices. As a result, Tesla has repeatedly cut prices for its older premium vehicles. Even after those cuts, the Model S still starts at around $95,000, while the Model X begins near $100,000. These price levels place them well above most mass-market electric cars.
During the earnings call, it was said that production of these two models will come to an end with what was described as an “honorable discharge.” Buyers interested in owning a Model S or Model X were encouraged to place orders soon. This statement made it clear that Tesla sees these vehicles as having completed their role in its journey.
Sales data also shows why this decision was made. Tesla’s more affordable and widely popular vehicles dominate deliveries. The Model 3 and Model Y together accounted for about 97 percent of the company’s 1.59 million vehicle deliveries last year. The Model 3 now starts at roughly $37,000, while the Model Y begins at about $40,000. More affordable versions of both vehicles were introduced late last year, further boosting their appeal.
Tesla converts Fremont factory shifts from cars to robots
The Fremont factory in California has long been one of the most important manufacturing sites of Tesla. It has produced several vehicle models over the years, including the Model S and Model X. With production of those vehicles ending, the factory will undergo a major transformation.
The existing production lines used for the Model S and X will be replaced. In their place, a new manufacturing setup will be installed to build Optimus humanoid robots. According to the announcement, this new line is designed to produce up to one million robots per year. This scale signals how seriously Tesla is taking its push into robotics.
The shift also involves creating a completely new supply chain. The parts, materials, and systems used to build cars are very different from those needed to build humanoid robots. As a result, almost nothing from the existing vehicle supply chain will carry over. This means new suppliers, new processes, and new skills will be required at the factory.
Tesla also expects changes to its workforce at the Fremont facility. Headcount is expected to increase rather than decrease. This suggests that while car production is ending for these models, the factory will remain busy and may even expand its operations. Output at the site is also expected to rise significantly as robot production ramps up.
This transformation of the Fremont factory represents a symbolic change. A facility once known for producing luxury electric cars will now focus on building intelligent machines designed to walk, move, and work like humans.
Revenue pressure and the rise of Optimus
The timing of this announcement is closely linked to the company’s recent financial performance. In its earnings report, Tesla revealed its first-ever annual revenue decline. Sales fell in three of the past four quarters. This slowdown highlights the growing challenges in the electric vehicle market, including fierce competition and price pressure.
Against this backdrop, attention is increasingly shifting away from traditional electric cars. Instead, focus is being placed on areas such as driverless technology and humanoid robots. At present, these areas do not yet contribute meaningful revenue. Even so, they are being presented as central to the company’s long-term identity.
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Optimus is being developed as a bipedal, intelligent robot. The goal is for it to handle a wide range of tasks. These tasks could include factory work and other everyday activities. Tesla has stated that it plans to unveil the third generation of Optimus within the current quarter. This version is described as the first design intended for mass production.
The robot program is treated as entirely separate from vehicle manufacturing. Its development requires different engineering approaches, components, and production techniques. That separation explains why the Fremont factory must be retooled so extensively.
By ending production of the Model S and X and dedicating factory space to Optimus, Tesla is making a clear statement. It is choosing to step away from older, less popular vehicles and invest heavily in a new category of technology. This move reflects changing priorities during a period of financial pressure and intense competition, while keeping all attention firmly on the facts announced during the earnings call.
