Tesla is set to discontinue production of two electric vehicle (EV) models as part of a transition towards robotics following the company’s first-ever decline in annual revenue.
CEO Elon Musk informed analysts during a conference call that the company would cease selling its older Model S and Model X vehicles and repurpose factory space to produce its Optimus robots instead.
Tesla disclosed that its investment would more than double this year to $20bn (£14.5bn), with $2bn of that amount allocated to its artificial intelligence division xAI.
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This increase in spending aims to deliver on a series of commitments made by Mr. Musk concerning Tesla’s shift towards self-driving cars and robotics, which have not yet met their targets.
Mr. Musk’s ambitions to develop Cybercabs – robotaxis – have faced obstacles due to a lack of capacity and regulatory approvals thus far.
He has previously cautioned that a scarcity of memory chips amid the global race for AI could impede production as it scales up later this year.
Tesla is exploring new revenue streams as the traditional EV market becomes increasingly competitive, with China’s BYD surpassing the company last year to become the world’s largest EV manufacturer.
The company’s revenues and profits took a hit in 2025 as core EV sales were affected by a backlash against Mr. Musk for his involvement in cost-cutting during the Trump administration and interventions in foreign elections.
The few sales Tesla did make were based on significant discounts, reflecting both the often aggressive opposition to Tesla by political adversaries and the lower prices of vehicles from Tesla’s competitors.
A U.S. tax credit for electric vehicles was also terminated by the Trump administration amidst Mr. Musk’s fluctuating relationship with the president.
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Tesla’s shares rose by 2% in after-hours trading – building upon modest gains from last year primarily attributed to the AI-driven turnaround plans pledged by Mr. Musk.
He is under pressure to meet a share price-based incentive plan, potentially valued at up to $1trn over 10 years, but some investors are concerned that his focus may be too broad.
Mr. Musk intends to take his rocket company SpaceX public, potentially in June.