Why Musk's Decision to End Model S/X Production Makes Sense for Tesla

When Elon Musk said on Tesla’s TSLA Q4 earnings call that it was time to give the Model S and Model X an “honorable discharge,” it sounded emotional—but it does seem the right move. These cars helped build Tesla’s identity, but keeping them alive today may actually slow the company down.

The Model S, launched in 2012, and the Model X, which debuted in 2015, were breakthrough moments for electric vehicles (EVs). But the relevance of these legacy models has now faded.

From Flagship Models to Minor Contributors

Tesla has stopped reporting Model S and X sales separately since Q4’23. Instead, they are being grouped with the Cybertruck under the “other models” category. In 2025, “other models” delivered 50,850 vehicles worldwide—just over 3% of Tesla’s total sales of 1.64 million units. Meanwhile, Model 3 and Model Y accounted for more than 1.58 million deliveries.

Even more telling is the trend. “Other models” sales fell nearly 40% year over year in 2025, compared with a roughly 7% decline for the Model 3/Y. Since their debut, the EV market has become far more competitive with more affordable models coming into the market. As a result, the Model S/X now generates less than 5% of Tesla’s total revenues—hardly enough to justify continued investment and factory space.

Fremont’s Next Chapter: From Cars to Robots

Tesla plans to retool its Fremont plant to support production of Optimus, its humanoid robot. Fremont, one of the largest manufacturing facilities in California, will repurpose the Model S/X production lines to scale Optimus output. Musk has suggested Tesla could eventually produce up to one million Optimus units per year.

Tesla is choosing to move past low-return luxury models and concentrate resources on areas with far greater long-term growth potential. This also shows how serious Musk is about moving beyond traditional vehicles and toward robotics, automation and AI-driven platforms.

Tesla’s Bigger Bet Is Beyond Cars

The Model S/X decision fits into a much larger transformation. Tesla plans capex of over $20 billion this year, funding expansion in humanoid robots, autonomous vehicles, and AI chip manufacturing. Musk has even said Tesla expects to eventually produce far more Cybercabs (its fully autonomous EV, which is on schedule for volume production this year) than all its other vehicles combined.

Last Word

Clearing out low-volume programs allows Tesla to focus squarely on its next growth frontiers. And if Tesla continues to double down on autonomy and robotics, tougher calls—possibly discontinuing Cybertruck—may lie ahead.

How Tesla’s Move Compares With GM and Ford

Tesla’s decision to end Model S and X production stands in contrast to how General Motors GM and Ford F are responding to the EV slowdown. After years of aggressive EV spending, Fordis now pivoting toward what delivers profits—gas-powered vehicles, hybrids, and lower-cost EVs. General Motors is making similar adjustments, reworking EV plans to protect margins. The company shifted its Orion plant away from EVs toward high-margin trucks and SUVs like the Chevrolet Silverado and GMC Sierra. At the same time, General Motors is reducing battery exposure by selling part of its Ultium Cells stake to LG Energy Solution and scaling back operations at its Factory Zero EV plant as demand cools.

While GM and Ford are reshuffling production to stabilize earnings, Tesla is taking a different approach—exiting low-impact models altogether. It is freeing up capital and factory capacity to focus on autonomy, robotics, and AI-driven growth.

The Zacks Rundown on TSLA Stock

Shares of Tesla have gained 12% over the past year, underperforming the industry.

From a valuation standpoint, TSLA trades at a forward price-to-sales ratio of 15.38, above the industry and its own five-year average. It carries a Value Score of F.

See how the Zacks Consensus Estimate for TSLA’s earnings has been revised over the past 90 days.

Tesla stock currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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