Tesla has announced plans to end production of its Model S and X vehicles at the Fremont, California, factory to repurpose it for manufacturing Optimus humanoid robots. This move, revealed during the company's fourth-quarter earnings call, signals a deeper commitment to artificial intelligence and robotics. Initial production of Optimus is expected to begin by the end of the year.
Tesla Inc. is pivoting toward robotics by winding down production of its Model S and X electric vehicles at the Fremont, California, facility. CEO Elon Musk stated during the fourth-quarter earnings call that the company will repurpose the factory for building Optimus, a humanoid robot designed for tasks in factories, retail, and households to boost efficiency.
Musk indicated that initial Optimus production would "probably" start by the end of the year. This shift comes amid challenges in Tesla's core automotive business, including a 3% year-over-year revenue decline and an 11% drop in automotive revenue, marking the company's first annual sales decline.
Optimus is seen by some as Tesla's potential "iPhone moment," akin to how Apple's 2007 smartphone launch transformed it from a computer maker to a consumer electronics giant. Like the iPhone, Optimus could generate recurring revenue through hardware sales and subscriptions for AI software updates enabling advanced tasks.
Tesla's stock has shown volatility, gaining 62% since a low in April following tariff announcements, though it rose 24% over the past 12 months to value the company at about $1.8 trillion, including Musk's vested options. The shares trade at around 206 times estimated 2026 earnings, reflecting high expectations for AI-driven growth.
Analyst opinions are mixed. The average price target for 2026 is $480, suggesting a 15% upside. Wells Fargo remains bullish on the long-term robotics potential, while GLJ Research analyst Gordon Johnson described Optimus as a "delusion" with only a 15% to 20% chance of delivering meaningful revenue, warning that enthusiasm borders on speculation.
