Tesla reported its first annual revenue drop as the electric vehicle maker shifts focus to artificial intelligence and robotics. According to BBC News, the company run by Elon Musk saw total revenues fall 3% in 2025. Profits dropped 61% in the final three months of the year. Tesla also announced it will stop making its Model S and Model X vehicles.
Factory Moves to Robot Production
Tesla will convert its California manufacturing plant to produce Optimus humanoid robots. The plant previously made the Model S and Model X cars. In January, China’s BYD overtook Tesla as the world’s biggest EV maker.
Tesla revealed a $2 billion investment in xAI, Musk’s artificial intelligence venture. Musk said investors asked the company to participate in the funding round. The move came despite a recent shareholder vote where abstentions and votes against investing in xAI outnumbered those in favor.
Spending Plans and Market Response
The company plans to increase spending by an estimated $20 billion. Musk told analysts the capital expenditure will be very big next year. Tesla shares rose about 2% in extended trading. Last year, shareholders approved a pay package for Musk worth nearly $1 trillion. To collect that payout, he must raise the firm’s market value over the next 10 years.
Product Line Changes
Jessica Caldwell from Edmunds said the Model S and Model X have been low-volume vehicles for Tesla. She noted it makes sense to drop them and focus on higher-volume products like the Model 3 and Model Y. Tesla is also pushing deeper into robotaxis.
Musk’s political activities, including a cost-cutting role in the Trump administration, alienated parts of Tesla’s customer base. Some customers protested at dealerships around the world. The shift also coincides with President Trump ending some government subsidies for non-fossil fuel cars.
