Tesla has revealed that its yearly revenue has reduced for the first time as the firm switches its focus to robotics and AI. The carmaker’s revenue dropped by 3% last year while its profits plummeted by 61% in the final quarter of 2025.
Tesla announced that it intends to stop producing the Model X and Model S electric vehicles. The California facility that has been making those EV models will now switch to manufacturing Optimus, the humanoid robots that the company makes.
It is notable that in January, Chinese firm BYD supplanted Tesla as the biggest maker of EVs in the world. Elon Musk, the CEO of Tesla, involved himself in U.S. and international politics in a way that proved not only controversial but also detrimental to the Tesla brand. His leadership of DOGE (an entity created to downsize the U.S. federal government and reduce waste) and his statements about how European countries are being led triggered a backlash that saw protests being conducted at Tesla showrooms.
Sales also dropped as sections of EV buyers opted to acquire other brands to demonstrate their dislike of Musk’s politics. Many owners of Tesla models also attached stickers to their vehicles distancing themselves from Musk’s political views.
This pivot to robotics and AI comes at a time when Tesla revealed that the firm would be ramping up its capital expenditure to about $20 billion this year to support its push into robotics and AI. xAI, an artificial intelligence startup owned by Musk, received a $2bn investment from Tesla.
Musk said this investment was supported by Tesla investors when a proposal to this effect was put before them. However, when the tally of investors who absented themselves from voting on this issue is added to those who voted against the measure, the number that voted in favor of the investment is a lot smaller.
Not many analysts are surprised that Tesla is discontinuing the production of the Model X and Model S electric vehicles. The models have been on sale for so long that they can no longer compete with newer models from other manufacturers since these latest models come with features that are superior to those offered in the aging line-up of Tesla.
The coming years are therefore likely to see Tesla increasingly working to assert itself within the robotics and artificial intelligence fields. This could put them in direct competition with notable tech titans like Alphabet Inc. (NASDAQ: GOOGL) (NASDAQ: GOOG) that have established a firm foothold within the AI space.
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