Tesla to Halt Model S/X Production, Focusing on Optimus
As a major strategic development in its pivot to robotics, Tesla will halt production of its flagship Model S and Model X electric vehicles to concentrate resources on the Optimus humanoid robot. The company projects the robotics market will eventually surpass the automotive market, positioning the sub-$20,000 Optimus for mass adoption in a potential $5 trillion market.
- The strategic pivot follows Tesla's first-ever annual decline in total revenue in 2025, with the company framing the move as a transition from a "hardware-centric business to a physical AI company". - The factory space in Fremont, California, previously used for the Model S/X, is being retooled with the long-term goal of producing up to 1 million Optimus units per year. - Tesla is leveraging its existing technology stack, controlling the robot with the same advanced AI system developed for its Full Self-Driving (FSD) software in its vehicles. - The company is working on the third generation of Optimus, which is the first version designed specifically for mass production, with a limited production run expected to begin in 2026. - To fund this shift to robotics and AI, Tesla is nearly doubling its capital expenditures, with plans to invest over $20 billion in 2026. - While Tesla is a high-profile entrant, the humanoid robotics field includes established and emerging competitors such as Boston Dynamics (Atlas), Figure AI (Figure 02), Agility Robotics (Digit), and Sanctuary AI (Phoenix). - Market forecasts for humanoid robots vary widely, with Goldman Sachs projecting a $38 billion market by 2035, while Morgan Stanley estimates a potential market of over $5 trillion by 2050. - Elon Musk has stated that public sales of Optimus could begin by the end of 2027, following a period of deployment and testing within Tesla's own factories throughout 2026.
