Tesla Model S and X will cease production, California factory becomes a robot manufacturing base

Despite core financial indicators such as revenue, earnings per share, and gross margin exceeding institutional expectations, the financial report data still clearly reflect the significant challenges Tesla is currently facing.

Recently, Tesla released its Q4 financial report. Data shows that Tesla’s revenue for the quarter was $24.9 billion, higher than some analysts’ previous expectations of $24.79 billion, but down 3.1% year-over-year, with automotive revenue at $17.7 billion, down 11% year-over-year. Operating profit was $1.41 billion, down 11% year-over-year, free cash flow was $1.42 billion, down 30% year-over-year. Tesla’s adjusted earnings per share for Q4 was $0.50, surpassing analysts’ expected 45 cents. The gross margin for Q4 was 20.1%, higher than the expected 17.1%.

Overall, in 2025, Tesla’s total revenue is approximately $94.827 billion, down 2.93% year-over-year. This marks Tesla’s first-ever annual revenue decline in history. The full-year net profit attributable to shareholders is about $3.794 billion, a decrease of 46.5% year-over-year. Tesla stated that part of the revenue decline was due to “decreased vehicle deliveries” and “lower regulatory credit income.”

According to Tesla’s previously announced vehicle delivery data, in Q4, global deliveries were 418,000 units, down 15.6% year-over-year, the lowest quarterly delivery volume since Q2 2022. In fact, Tesla’s vehicle sales have been sluggish in recent quarters due to fierce competition worldwide, including in the Chinese market, especially from BYD (002594), which surpassed Tesla last year to become the world’s largest electric vehicle manufacturer.

Looking at the full year, Tesla delivered a total of 1.636 million vehicles globally, in line with expectations but down 8.6% from 2024, marking the second consecutive year of annual sales decline for this electric vehicle manufacturer. In the Chinese market, Tesla’s retail sales were about 625,000 units, down 4.78% year-over-year.

Media analysis suggests that the decline in sales is significantly influenced by the U.S. federal electric vehicle tax credit policy being canceled at the end of Q3, new electric vehicle competition from traditional automakers, and CEO Elon Musk’s highly controversial political stance.

Some also believe that part of the performance decline is related to the aging of Tesla’s product line. Notably, during the company’s earnings call, Musk announced that Tesla plans to cease production of the Model S and Model X in the next quarter, both of which were first sold in 2012 and 2015, respectively.

As the automotive business wanes, Musk is betting on AI and robotics technology for the company’s future. The financial report shows that Tesla will “transform from a hardware company into a physical AI company.” Musk stated that the Model S and Model X factories in Fremont, California, will be converted into production bases for Tesla’s upcoming Optimus robots. According to Tesla and Musk, the Optimus robot is expected to begin production by the end of 2026 and be available to the public in 2027.

Tesla’s Chief Financial Officer Vaibhav Taneja said the company’s capital expenditure this year will be about $20 billion, with investments planned for new factories, Optimus robots, and AI computing resources. Recently, Tesla also reached an agreement with Musk’s AI startup xAI, investing about $2 billion.

Tesla stated that investments in xAI and cooperation with the company “aim to enhance Tesla’s ability to develop and deploy artificial intelligence products and services at scale into the real world.”

With the ongoing AI investment boom and Musk’s promise to build a “robot army,” Tesla’s stock price once rebounded to an all-time high in December but has since significantly retreated. As of the close on January 28 local time, Tesla (TSLA.O) closed at $431.46 per share, up 1.92% after hours.