A near-50% profit slump in 2025 forces Elon Musk to redraw the company’s future. He is using the end of Tesla’s two original flagships to underline a decisive strategic shift: away from low-volume luxury cars and toward autonomy, artificial intelligence, and humanoid robotics.

Tesla’s decision to discontinue the Model S and Model X comes at a moment when the company is under growing financial pressure. In 2025, Tesla’s net profit fell by 46% to $3.8 billion, while revenue slipped 3% to $94.8 billion and global vehicle deliveries declined from 1.79 million to 1.64 million units.

Automotive revenue dropped sharply, reflecting weaker demand and sustained price pressure. Against this backdrop, the electric car pioneer is making one of its most explicit statements yet that it no longer sees its future primarily as a car manufacturer.

Instead, Tesla is doubling down on self-driving technology, robotaxi services, and its humanoid robot Optimus, even as rivals, particularly from China, continue to gain ground.

Sobering year 2025

Financially, 2025 was a sobering year. Growth came mainly from energy storage and services. For a company long judged by its car margins and delivery growth, this marked an apparent loss of momentum.

Against this backdrop, Elon Musk announced that production of the Model S and Model X will end in the coming months. The two models, once central to Tesla’s identity, are being phased out to free up space and retool the Fremont factory for the mass production of Optimus, Tesla’s humanoid robot.

Musk framed the move as inevitable in a future defined by autonomy and artificial intelligence rather than by traditional vehicle line-ups.

Fading in volume for years

While symbolically powerful, the decision is also commercially logical. The Model S and X have been fading in volume for several years. Tesla no longer publishes detailed model-by-model sales data.

Five years ago, the Model S and X together sold around 57,000 units annually. By 2025, Tesla’s entire ‘other models’ category, including S, X, Cybertruck, and Semi, amounted to just 50,850 vehicles, highlighting how far the two former flagships have slipped into niche status.

Nowhere is this shift more evident than in Europe. In 2025, Tesla’s registrations across the European Union fell by almost 40%, dropping to around 150,000 vehicles, even as the overall battery-electric car market continued to expand.

Tesla’s EU market share slipped to roughly 1.4%, underlining how sharply the brand lost ground in a region that had long been one of its strongest.

Only a handful sold in Benelux

In the Benelux, the decline of the Model S and Model X is even more striking. In the Netherlands, official registration data show that only 31 Model S and 49 Model X vehicles were registered in the entire year, effectively removing both models from the market.

Belgium shows a similar pattern: while Tesla still sells significant volumes of the Model Y, registrations of the Model S and X have fallen to low double-digit or even single-digit numbers, reflecting the minimal demand for electric cars priced well above €100,000 and intensifying competition from German and Chinese premium brands.

Crucially, the end of the Model S and X is not the cause of Tesla’s profit decline. Analysts estimate their volumes are too small to materially affect the company’s financial results.

Instead, the move reflects a broader strategic reprioritisation. With profits under pressure and investment needs rising, Tesla is shedding low-volume complexity and reallocating capital and factory space to areas Musk believes will define the next growth wave.

‘Physical AI’

That growth wave, in Musk’s vision, lies in what he calls ‘physical AI’: fully autonomous driving, robotaxi fleets, and humanoid robots. Tesla plans massive capital expenditure in 2026, mainly for AI computing infrastructure and new production lines, laying the groundwork for products that are still at an early commercial stage.

Optimus, in particular, is presented by Elon Musk as a future mass-market product. Still, most analysts see a gradual, multi-year path before humanoid robots become a meaningful revenue stream.

Tesla expects to deploy Optimus units internally at its factories as early as 2026, with external sales likely to follow later in the decade rather than immediately. True mass production at scale is more realistically a late-2020s prospect, assuming rapid progress in reliability, dexterity, safety, and cost reduction.

On pricing, Musk has suggested that Optimus could eventually sell for $20,000 to $30,000, positioning it below the cost of a car and within reach of businesses and, later, households.

However, early versions are expected to be significantly more expensive and targeted primarily at industrial and commercial customers, where labour substitution can justify higher prices.

As with electric vehicles, Tesla’s long-term strategy hinges on steep learning curves and scale effects. But whether humanoid robots can follow the same cost trajectory remains one of the biggest open questions in the industry.

China is ‘very strong’ in AI and robots

China looms large in this strategic pivot. In electric vehicles, Chinese manufacturers such as BYD have already overtaken Tesla in global volume and are expanding rapidly in Europe, intensifying pressure on prices and margins.

A similar dynamic is now emerging in robotics. Chinese companies and automakers are investing heavily in humanoid robots for industrial use, backed by strong state support, fast-moving supply chains, and vast manufacturing ecosystems.

Notably, Elon Musk himself acknowledged just days ago that China is “very strong in both AI and robotics,” warning that Chinese players are likely to be Tesla’s biggest competitors in humanoid robots because of their ability to combine advanced AI with unparalleled manufacturing scale.

Companies such as XPeng have already positioned humanoid robots as a long-term strategic pillar alongside electric vehicles and autonomous driving, focusing on practical industrial deployment rather than consumer spectacle.

From Musk’s perspective, delaying Tesla’s push into robotics risks repeating the EV story, where Chinese rivals closed the gap and, in some cases, overtook Western pioneers faster than expected.