Tesla $TSLA ( ▼ 2.43% ) is pivoting on its EV play, opting to invest more in robotics and artificial intelligence amid a drop in annual revenue.
The details: The move is arguably one of Tesla’s most notable shifts to date for the company widely credited with leading the mass-market EV push in the U.S. and globally, reports Financial Times.
The plan involves Tesla ending production of the premium S and X models next quarter and converting its California factory into a manufacturing hub for its Optimus humanoid robots.
The company is expected to spend more than $20 billion in 2026 to build factory capacity and invest in AI infrastructure, according to CFO Vaibhav Taneja.
There have even been reports that Tesla could potentially be merged with Elon Musk’s artificial intelligence company, xAI, and SpaceX, per Reuters.
What they’re saying: “It’s time to basically bring the Model S and X programs to an end with an honorable discharge, because we’re really moving into a future that is based on autonomy,” CEO Elon Musk said. “So, if you’re interested in buying a Model S and X, now would be the time to order it.”
Musk has previously said the future of the company lay in self-driving taxis and humanoid robots, insisting they could help drive Tesla’s valuation to new levels.The tech pioneer recently put that valuation number at closer to $25 trillion as Tesla transforms into a robotics company.
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Why it matters: Tesla's retreat from the S and X suggests even the company that created demand for luxury EVs no longer sees that segment as viable against cheaper Chinese competition and a post-subsidy U.S. market.
Between the lines: News about Tesla’s plans to scrap the premium S and X models to invest more in robotics and AI comes as the company reports an annual revenue drop for the first time.
Tesla’s adjusted net income fell 16% to $1.8 billion in the fourth quarter, beating Wall Street expectations, per the Financial Times.
Net income, which includes stock-based compensation and losses on digital assets Tesla owns, dropped 61% to $840 million.
Still, Tesla isn’t looking to abandon EVs, with plans to roll out its all-electric Cybercabs in seven more U.S. cities by the summer, expanding beyond initial launches in San Francisco and Austin. The company also indicated its long-awaited Roadster sports car will launch in April, according to Financial Times.
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