Tesla to End Model S and X Production for 1M Optimus Robots Yearly

The Era of "S3XY" is Over: Tesla Model S and Model X Discontinued.

Image: Tunde Abati / Unsplash

The flagship era is officially dead. In a move that fundamentally redefines the company’s future, Tesla confirmed during its Q4 2025 earnings call (January 28, 2026) that it is discontinuing its luxury vehicles. The Tesla Model S and Tesla Model X have received what CEO Elon Musk called an "honorable discharge."

The historic production lines at the Fremont, California factory are being dismantled to make room for the mass production of the Optimus robot.

The "Honorable Discharge": Why the Model S and Model X Are Leaving

For early adopters, the Tesla Model S was the sedan that proved EVs could be cool, while the Tesla Model X followed in 2015 as a technological marvel. However, the financial data from 2025 paints a clear picture of why this decision was necessary.

Market Analysis: The Numbers Behind the Decision

Combined, these premium Tesla models accounted for less than 3% of Tesla’s global deliveries in 2025.

• Declining Relevance: With the Model 3 and Model Y dominating sales, the high-cost, low-volume nature of the Model S and Model X became a drag on factory efficiency.
• Space vs. Revenue: Maintaining a dedicated 100,000-unit capacity line in Fremont is no longer justifiable when that same square footage could house high-density robotics manufacturing.

From Cars to "Physical AI": The Optimus Pivot

The most significant news from the earnings call was the scale of the replacement. Elon Musk announced that the repurposed Fremont lines are targeting a production rate of 1 million Tesla Optimus units yearly by late 2027.

The Tesla Optimus Gen 3, set to be unveiled later in Q1 2026, requires a completely different supply chain. By swapping out the massive chassis stamping presses used for the Tesla Model S Model X for smaller, high-precision actuator assembly stations, Tesla believes it can drive the robot's price down to between $20,000 and $30,000.

Why the shift?

• Margins: The Tesla Model S and Tesla Model X profit margins were heavily compressed by the 2024-2025 EV price wars.
• Future Value: Musk stated that "80% of Tesla’s future value" will come from the Optimus robot and unsupervised autonomy, effectively signaling that Tesla is no longer just a car company.

What This Means for Current Owners

If you currently own a Tesla Model X or drive a Model S, your vehicle is not becoming obsolete. Musk clarified that Tesla will support these vehicles "for as long as people have them."

However, this announcement is expected to trigger a shift in the used market. With order books closing in Q2 2026, the final "Signature Edition" runs of the Tesla Model S and Tesla Model X are likely to become sought-after collector items.

Industry Context: The "Tesla Model X Elon" Strategy

Regarding the Tesla Model X Elon Musk has often hinted at a "Physical AI" future. By removing the complexity of building luxury passenger vehicles in Fremont, Tesla frees up its most talented engineers to focus on the Tesla Optimus. The company is betting that a humanoid robot capable of household tasks will eventually generate more utility (and revenue) than a luxury SUV.

The Risk and The Reward

The Tesla Model S Model X lineup built the brand's reputation, but Tesla might be thinking of focusing on Optimus robot production due to heavy investment surges in AI. In October 2024, Elon Musk also introduced a Robotaxi and Cybercab which runs driverless and lacks steering wheels.

Although in 2025 the Tesla bear drops in profit by 60% due to its self-driving cars, the step of shifting from established players like Model S and Model X is classic Musk. These cars put the company on the map, but Musk’s actions are always risk-taking. Now, we wait to see what conditions are heading towards Tesla.