— Tesla CEO Elon Musk announced on the company’s fourth-quarter earnings call that Tesla will end production of the Model S and Model X and retool its Fremont, California, factory to build Optimus humanoid robots. Musk described the move as an “honorable discharge” for the two legacy models and urged buyers to order now if they want one. The decision follows a year of softer revenue for Tesla and the company’s sustained shift of emphasis from traditional electric vehicles to autonomous systems and robotics. Tesla said it plans to show a third-generation Optimus design this quarter that it calls its first meant for mass production.
Key Takeaways
- Tesla will stop producing the Model S (2012) and Model X (2015) and convert Fremont production lines to build Optimus humanoid robots, CEO Elon Musk said on Jan. 28, 2026.
- Musk characterized the change as an “honorable discharge” and advised prospective buyers to order S and X models now.
- Tesla reported global deliveries of 1.59 million vehicles last year; Model 3 and Model Y accounted for about 97% of those deliveries.
- Current base prices listed on Tesla’s site: Model S roughly $95,000 and Model X about $100,000; Model 3 and Model Y start near $37,000 and $40,000 respectively.
- Tesla posted its first annual revenue decline on record and saw sales fall in three of the last four quarters, a backdrop to Musk’s shift in focus.
- Musk said Fremont will be retooled to a planned Optimus production line with a target capacity of 1 million units per year, a claim the company says requires a new supply chain.
- Company plans to unveil a third-generation Optimus this quarter, described by Tesla as its first design intended for mass production.
Background
The Model S was introduced in 2012 and the Model X in 2015; after the original Roadster they are among Tesla’s oldest production models. Over recent years Tesla cut prices on those higher-end models as the global EV market became more crowded and rivals expanded competitive offerings. Tesla’s volume strategy has shifted toward lower-priced models — the Model 3 and Model Y — which made up nearly all deliveries last year.
Financially, Tesla disclosed its first annual revenue decline in the company’s history during the same earnings release in which Musk made his announcement. Sales fell in three of the past four quarters, pressuring management to reexamine capital allocation and product priorities. Musk has for years articulated a long-term vision that extends beyond conventional vehicles to autonomous driving and humanoid robotics, though those businesses currently represent nascent or no revenue streams for Tesla.
Main Event
On the company’s Jan. 28 earnings call, Musk said it was time to “basically bring the Model S and X programs to an end with an honorable discharge.” He told investors and callers that buyers who want one should place orders soon, signaling an end to ongoing production. The announcement marks a sharp pivot away from two of Tesla’s long-standing nameplates toward robotics.
Musk explained that Optimus requires a wholly different supply chain than Tesla’s vehicle programs, saying “there’s really nothing from the existing supply chain that exists in Optimus.” He characterized the conversion as replacing the S and X line in Fremont with what he termed a “1 million unit per year line of Optimus.” Tesla also said it expects headcount at Fremont to grow as the plant transitions work and output increases under the new program.
Tesla’s public materials state the company aims to unveil a third-generation Optimus this quarter, calling it the first design meant for mass production. The company envisions Optimus as a bipedal, general-purpose robot for tasks ranging from factory labor to household chores — though commercial viability and regulatory pathways remain untested at scale.
Analysis & Implications
If implemented, converting Fremont from premium EV production to a high-volume robotics line would be an unprecedented manufacturing pivot. Fremont has produced several Tesla models for more than a decade; retooling that capacity for humanoid robots implies major capital expenditures, supply-chain redesign, and retraining of workers. The scale Musk cites — 1 million units per year — would exceed any current commercial humanoid robotics production by orders of magnitude and therefore faces steep engineering and logistics hurdles.
For Tesla’s auto business, the move signals an acceptance that the S and X occupy a shrinking slice of the company’s volume economics. The Model 3/Y product family delivered nearly all units in 2025 and underpins Tesla’s revenue base. Ending S/X production could simplify parts inventories and reduce fixed costs, but it removes higher-margin models from Tesla’s lineup and narrows the company’s product breadth in the luxury EV segment.
Strategically, the pivot doubles down on Musk’s ambition to create new markets rather than defend legacy segments. If successful, Optimus could open fresh revenue streams and services that are less cyclical than car sales; if unsuccessful, the company risks diverting investment from core automotive operations while facing heightened scrutiny from investors focused on near-term profitability and cash flow.
Comparison & Data
| Metric | Value/Year |
|---|---|
| Total global deliveries | 1.59 million (last year) |
| Share from Model 3 & Y | ~97% of deliveries |
| Approx. base prices | Model 3 $37,000; Model Y $40,000; Model S $95,000; Model X $100,000 |
| Announced Optimus target | 1 million units/year (company claim) |
The table shows how volume is concentrated in lower-priced models, underlining why Tesla may choose to shed niche luxury lines. Comparing the announced Optimus target with current real-world robotics production highlights the gap between aspiration and existing industry output. Investors will look for detailed production schedules, cost per unit estimates, and supplier commitments to assess feasibility.
Reactions & Quotes
“It’s time to basically bring the Model S and X programs to an end with an honorable discharge.”
Elon Musk, Tesla CEO (earnings call)
Musk framed the decision as a respectful retirement for the two models and a forward-looking reallocation of factory capacity.
“We plan to unveil the third generation of Optimus this quarter — our first design meant for mass production.”
Tesla (company statement)
Tesla’s statement positions the new Optimus iteration as a production-capable design, but the company has not published detailed manufacturing timelines or unit-cost targets tied to that claim.
Unconfirmed
- The feasibility of producing 1 million Optimus units per year at Fremont has not been independently verified and lacks published supplier commitments.
- Tesla has not released a detailed timeline or unit-cost estimate for Optimus mass production, so expected dates and margins remain unclear.
- The exact scale and timing of expected headcount increases at Fremont have not been specified by Tesla.
Bottom Line
Tesla’s announced end of Model S and Model X production and the planned conversion of Fremont to build Optimus represent a bold strategic bet: the company is reallocating legacy manufacturing capacity toward a vision of robotics and advanced autonomy. The move aligns with CEO Elon Musk’s long-stated priorities but raises immediate questions about near-term automotive margins, the practicality of scaling humanoid robots, and the pace at which new supply chains can be established.
Investors and industry observers should expect a period of close scrutiny: the company must provide concrete production plans, supplier agreements, and cost targets for Optimus to make the case that the pivot supports long-term value. Meanwhile, customers for Tesla’s premium sedans and SUVs have a limited window to order before those lines wind down.