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 ContributorsTesla 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 RobotsTesla 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 CarsThe 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 WordClearing 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 FordTesla’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 StockShares of Tesla have gained 12% over the past year, underperforming the industry. Image Source: Zacks Investment ResearchFrom 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. Image Source: Zacks Investment ResearchSee how the Zacks Consensus Estimate for TSLA’s earnings has been revised over the past 90 days. Image Source: Zacks Investment ResearchTesla stock currently carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report General Motors Company (GM): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks