Tesla to retire its flagship models to make room for Optimus robot production

Tesla will discontinue production of its two flagship electric vehicles, the Model S and Model X, in the second quarter of 2026, CEO Elon Musk confirmed during an earnings call with investors. The decision marks the end of an era for Tesla’s longest-running models, which helped establish the company as a leader in the electric vehicle (EV) market.

According to Musk, the move will free up space at Tesla’s Fremont, California factory for production of Optimus, the company’s humanoid robot project. “It’s time to basically bring the Model S and X programs to an end with an honourable discharge, because we’re really moving into a future that is based on autonomy,” he said. “So if you’re interested in buying a Model S or X, now would be the time to order it.”

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The announcement caught investors and customers off guard, as no advance warning had been given about the discontinuation. Tesla’s Model S, a luxury sedan launched in 2012, and Model X, an SUV with distinctive gull-wing doors introduced in 2015, have been key to the brand’s identity. However, their sales have steadily declined over recent years as Tesla shifted its focus toward mass-market models such as the Model 3 and Model Y.

In 2025, Tesla reported sales of 50,850 units under its “other models” category, which includes the Model S, Model X, and Cybertruck, representing a 40.2 per cent year-on-year decline. The company’s fourth-quarter profits also fell by 61 per cent, underscoring the growing financial pressure as it transitions from traditional car manufacturing to AI-driven ventures.

Musk’s decision to phase out Tesla’s original EVs underscores his ambition to transform the company into a broader technology firm specialising in robotics and artificial intelligence. The Optimus humanoid robot, currently in development, is a cornerstone of this strategy. Musk has previously claimed that Optimus could eventually outperform Tesla’s automotive division in value.

However, this strategic shift comes amid operational challenges and slowing EV sales in key markets. Tesla’s long-anticipated debut in India, for instance, has struggled to gain momentum.

The company introduced the Model Y as its first offering in India, priced from nearly $70,000, placing it well above most domestic EV options. While initial reports suggested around 600 bookings, Bloomberg noted that many of those reservations have not converted into confirmed sales. Official figures show Tesla registered only 227 vehicles in India throughout 2025, a modest number considering the country’s booming EV demand.

Sources familiar with Tesla’s rollout in India said that many customers who paid deposits are hesitant to complete purchases, especially for the shorter-range Model Y. Interest in the long-range variant remains higher, but deliveries have been slow, leading to unsold inventory and dampened enthusiasm among potential buyers.

Meanwhile, India’s EV market continues to expand rapidly. According to the Federation of Automobile Dealers Associations (FADA), total EV retail sales surged 16.37 percent year-on-year to 2.27 million units in 2025. Electric passenger car sales alone jumped 77 percent, driven largely by affordable models from Tata Motors and JSW MG Motor India, both of which cater to price-sensitive consumers and offer strong after-sales support.

Against this backdrop, Tesla’s premium pricing and limited local footprint seem increasingly misaligned with the realities of India’s EV landscape. As Musk redirects Tesla’s resources toward AI and robotics, the company faces the challenge of maintaining its automotive legacy while pursuing a future where cars may no longer be its defining product.