Tesla cuts car models in shift to robots and AI
Getty ImagesTesla says its annual revenue has fallen for the first time as the electric vehicle (EV) maker shifts it focus to artificial intelligence (AI) and robotics.
The company, which is run by multi-billionaire Elon Musk, reported a 3% decline in total revenues in 2025, while profits fell 61% in the last three months of the year.
Tesla also announced plans to end production of its Model S and Model X vehicles. It will now use the manufacturing plant in California that made those cars to produce its line of humanoid robots – known as Optimus.
In January, China’s BYD overtook Tesla as the world’s biggest EV maker, while Musk’s involvement in politics both in the US and abroad has proved controversial.
Tesla also revealed a $2bn (£1.45bn) investment in Musk’s artificial intelligence venture, xAI.
“A lot of investors asked us to do this,” Musk said of Tesla’s participation in xAI’s latest funding round. “They say we should invest in xAI, so we’re just doing what shareholders asked us to do pretty much.”
The move comes despite a recent vote taken by Tesla shareholders on a proposal to invest in xAI. Abstentions and votes against the idea outnumbered those who approved.
Last year, investors overwhelmingly voted to grant Musk – the world’s richest person – a record-breaking pay package that could be worth nearly $1tn.
To collect that payout he must drastically raise the firm’s market value over the next 10 years.
The company is also due to significantly ramp up spending, by an estimated $20bn.
“It’s going to be a very big [capital expenditure] next year,” Musk said on a call with analysts. “We’re making big investments for an epic future.”
Tesla shares rose by about 2% in extended trading.
It comes after Musk’s entry into politics, including a high-profile cost-cutting role in the administration of US President Donald Trump.
His political activities alienated parts of Tesla’s customer base, with some protesting at its dealerships around the world.
The shift away from its EV roots also coincides with Trump rescinding some US government subsidies for non-fossil fuel cars.
Tesla, which was once one of the world’s most profitable car companies, has also been pushing deeper into robotaxis.
The company’s shift into newer businesses also comes as it contends with a dated line of electric vehicle, analysts say.
“The Model S and Model X have been low-volume vehicles for Tesla for a while now,” said Jessica Caldwell, Head of Insights at Edmunds.
“From a portfolio and focus standpoints, it makes sense to drop them and concentrate on higher-volume products like the Model 3 and Model Y, along with other business expansion bets,” Caldwell added.
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