Tesla is saying goodbye to two of its EV models. As sales and deliveries fall, Elon Musk is focusing on this instead

Tesla, a brand once synonymous with consumer electric vehicles, is ditching some of the cars that brought its success.

CEO Elon Musk has announced that the Model S and X vehicles are getting an “honorable discharge,” with production of them ending sometime next quarter. Instead, the company will use some of its factory space to build its humanoid Optimus robots. 

The news, shared during Tesla’s quarter-four earnings call on Wednesday, January 28, comes as Tesla expands manufacturing of its Optimus robots, full self-driving vehicles, and robotaxis. 

In fact, Tesla used its quarterly earnings report to describe itself as a “physical AI company.”

That report holds many of the answers as to “why.” Tesla’s total revenue fell 3% year-over-year from $25.7 billion to $24.9 billion, while its automotive revenues fell 11% YOY from $19.8 billion to $17.7 billion. 

In quarter four, production of Model S and X vehicles dropped by 48% YOY, while deliveries fell 51% YOY.

None of this was helped by Elon Musk’s polarizing political views, on-again, off-again relationship with President Donald The President, and the termination of $7,500 EV tax credits last fall. 

Despite all this, Musk used the investors’ call to make one last push to customers: “If you’re interested in buying a Model S and X, now would be the time to order.”

The two models made up less than 3% of deliveries over the last quarter, with the remainder being Model 3 and Y vehicles. The latter two models appear to still be available for Tesla customers. 

What’s next for Tesla? 

Tesla is all in on AI. Earlier this month, the company invested about $2 billion in xAI, another Musk venture.

The pair also created a “framework agreement” to collaborate on AI that should “enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale,” according to Tesla’s quarterly report. 

The company plans to announce the Gen 3 version of Optimus this quarter and says it’s the first one designed to be mass produced. Tesla aims to start production of the humanoid robot by the end of this year and plans to reach one million robots annually. 

However, Musk noted that Tesla is still “at the early stages” when it comes to Optimus. So far, it has only completed some basic factory tasks. 

Finally, Tesla is continuing to push its full self-driving mode and robotaxis—though most places still require a “safety monitor.” 

The pivot doesn’t seem to have rattled investors. Shares of Tesla Inc. (Nasdaq: TSLA) rose a bit over 2% in premarket trading on Thursday. The stock is up more than 10% over the last 12 months. 

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