Key News: Tesla to Discontinue Two Flagship Models
Tesla CEO Elon Musk made a groundbreaking announcement during the investor call on Wednesday—Tesla will officially stop producing the Model S and the Model X SUV starting next quarter.
Musk's statement was direct: “The Model S and Model X projects are basically over. Production will cease next quarter.” This is not a last-minute decision, but a key move in Tesla’s strategic shift.
BREAKING: Elon Musk has announced that @Tesla is discontinuing the Model S and Model X in Q2 2026.
— Sawyer Merritt (@SawyerMerritt) January 28, 2026
"We are going to convert that production space to an Optimus factory. It's part of our overall shift to an autonomous future." pic.twitter.com/ZEDaDy0z9d
Key Insight: Cessation Is Not Retreat, but a Strategic Shift
Many might panic upon hearing the news of cessation, fearing that Tesla is abandoning its electric vehicle business. However, this is not the case. The Model S and Model X have been Tesla's flagship models, accompanying the company through many pivotal stages. The decision to discontinue these models is driven by the need to “optimize resources”—focusing efforts and production capacity on more promising fields: artificial intelligence (AI) and robotics, aiming to transition from a “hardware-focused EV manufacturer” to a “physical AI-driven tech company.”
Production Shift: Fremont Factory to Become a “Robotics Production Hub”
After production ends, the Fremont factory, which previously produced the Model S and Model X, will not remain idle. Musk has already outlined plans to upgrade and repurpose the facility into the exclusive production base for Tesla's new Optimus robot. Musk has called this robot “the greatest product ever,” with plans to begin production in late 2026 and officially release it to the public in 2027.
Market Feedback: Performance Exceeds Expectations, Investors Are On Board
Despite being in a transition phase, Tesla's latest fourth-quarter financial report exceeded Wall Street's expectations: earnings per share of $0.50 (compared to the expected $0.45) and revenue of $24.9 billion (compared to the expected $24.79 billion).
Additionally, in December last year, Tesla’s stock price surged to an all-time high, and shareholders approved Musk's compensation plan. This all indicates strong investor confidence in Tesla's shift towards AI and robotics.
Capital Allocation: $20 Billion + $2 Billion, Fully Supporting the Transition
The transition requires significant financial backing, and Tesla is well-prepared.
Tesla’s CFO revealed that the company plans to spend $20 billion in capital expenditures, focusing on computational power, battery supply chains, and AI chips to support projects like the Optimus robot and autonomous taxi services. Furthermore, Tesla will invest $2 billion into Musk’s xAI company to bolster its AI technology.
Summary: Discontinuation Marks “Goodbye to the Past,” and “Hello to a New Future”
The cessation of Model S and Model X production is not the end but the beginning of a new chapter for Tesla. Moving forward, Tesla's core focus will be on artificial intelligence, robotics, and autonomous driving. With clear planning, ample funding, and powerful technology, Tesla aims to position itself as a leader in the “physical AI” sector.
