Tesla axes car models as shifts focus to robots and AI

Tesla saw its annual revenues fall for the first time as demand for electric vehicles wanes. The US-based company says it will discontinue two of its models and shift its focus to robotics and artificial intelligence (AI).

The company reported a 3% decline in total revenues in 2025, with profits falling 61% in the last three months of the year. Last year China's BYD overtook Tesla as the world’s biggest EV maker.

Tesla has announced plans to end production of its older Model S and Model X vehicles. The company will focus on higher-volume products such as the Model 3 and Model Y.

Despite the downturn in sales, Tesla has announced plans to more than double capital spending to a record high of more than $20 billion this year. However, instead of focussing on electric vehicles the company will be shifting investment to business lines such as fully autonomous vehicles and humanoid robots.

The manufacturing plant in California that produced the Model S and Model X cars will be converted to produce its humanoid Optimus robots.

“This is going to be a very big capex year,” Tesla’s chief executive Elon Musk said in a briefing call. “We're making big investments for an epic future.”

Tesla’s chief financial officer Vaibhav Taneja explained most of the $20 billion investment will be spent on production lines for the Cybercab, a fully autonomous vehicle without a steering wheel and pedals, the Tesla semi-truck, Optimus robots and plants for battery and lithium production, said.

Tesla also revealed a $2bn investment in xAI, an artificial intelligence venture led by its multi-billionaire owner Elon Musk. This comes despite a recent shareholder vote on a proposal to invest in xAI in which abstentions and votes against the idea outnumbered those who approved. “A lot of investors asked us to do this,” said Musk. “They say we should invest in xAI, so we're just doing what shareholders asked us to do pretty much.”

Tesla shares rose by about 2% in extended trading following the announcements.

Last year, investors voted to grant Musk a pay package that could be worth nearly $1tn. To realise this deal he must raise the firm’s market value over the next 10 years.

A multi-billionaire, Elon Musk has made headlines in recent years airing controversial views on his social media platform X and playing a role in the administration of US President Donald Trump.