Tesla, Inc. is giving its flagship Model S and Model X vehicles an “honorable discharge,” officially winding down production next quarter to retool the assembly lines for its next big bet: the Optimus humanoid robot. The move, confirmed in the company’s latest shareholder deck and subsequent earnings call, signals a hard pivot from luxury EV pioneer to a full-blown AI and robotics company.
CEO Elon Musk stated the company’s Fremont, California, factory will be converted to eventually produce a staggering one million Optimus units per year. This ambitious plan hinges on the upcoming Gen 3 version of Optimus, described as the first design intended for mass production, which is slated for a Q1 unveiling. Underpinning this entire venture is the new AI5 chip, a project Musk calls “arguably the number one most critical thing to get done,” and one he’s personally spending his Saturdays working on.
The strategic shift was further detailed in Tesla’s Q4 Shareholder Deck, which, for the first time, listed Optimus’s California production line as “under construction.” The company plans to begin production before the end of 2026. This all-in bet on robotics comes as Tesla reported its first-ever full-year revenue decline, making the sunsetting of the very cars that built its brand a calculated, if not sentimental, sacrifice for its autonomous future.
Why is this important?
Tesla is making it brutally clear that it no longer sees itself as just a car company. By sacrificing its original, high-margin vehicles, it’s freeing up capital and manufacturing space for what it believes is the real prize: general-purpose humanoid robots. The one-million-unit annual target is beyond audacious; it’s a declaration that Tesla intends to create and dominate a market that, for now, barely exists.
The AI5 chip is the linchpin for this entire vision, intended to power not just the next generation of autonomous vehicles but also an army of humanoid workers. This move redefines Tesla’s competitive landscape, pitting it less against traditional automakers and more against emerging AI and robotics giants. It’s a high-risk, high-reward pivot that bets the company’s future on a world populated by its own intelligent machines.
