Tesla CEO Elon Musk kicked off the new year with several jaw-dropping surprises for shareholders, including Tesla investing $2 billion in one of his own companies, artificial intelligence company xAI, and the sudden cancellation of two of the company’s models, the Model S and Model S X.
The moves are striking even against the backdrop of Musk’s unfettered management style, underscoring the profound transformation the automaker is undergoing as it loses ground to Chinese rivals in the electric vehicle market. Musk said Tesla would use the freed-up factory space to build Optimus robots to replace discontinued models, a line of still-experimental humanoid robots that Musk said would eventually perform everything from household chores to surgery.
Tesla executives stressed that investments in xAI will make Tesla more efficient because it won’t have to spend similar resources on artificial intelligence, which Musk said will ultimately help Tesla manage its massive fleet of self-driving cars and Optimus robots.
“We’re just doing what shareholders ask us to do, pretty much,” Musk said on a conference call Wednesday night, noting that “a lot” of investors have asked for an investment in xAI.
After the earnings report was released, Tesla’s stock price rose about 1.8% in after-hours trading on Wednesday.
Fourth-quarter revenue fell 3% year over year, which some analysts said was due to slowing electric vehicle sales due to the end of federal tax credits. Still, Tesla beat Wall Street’s targets, with revenue of $24.9 billion compared with expectations of $24.8 billion.
Musk emphasized that Tesla has changed its mission from “accelerating the world’s transition to sustainable energy” to “building a world of extreme abundance” and talked about the most likely path for artificial intelligence to help all mankind obtain “universal high income” and better health care. The language used in the call, which included a reference to a hypothetical rare earths refinery “that we really desperately need in the United States,” alluded to the time he spent with President Trump last year.
Tesla has recently moved away from its roots as an automaker in favor of autonomous software and robotics. “It’s time to basically end the Model S and X programs with an honorable retirement because we are really moving towards a future based on autonomy,” Musk said.
Musk said Tesla operates 500 robotaxis in Austin and San Francisco and said it was conducting “randomly selected paid rides” in Austin without safety drivers, although it was unclear how many unsupervised rides there were. Tesla announced for the first time this quarter how many customers purchased its Full Self-Driving (FSD) software. Subscriptions in 2025 will be 1.1 million, up from 800,000 in 2024.
Musk has been making promises about autonomous driving for more than a decade, but he’s far behind his schedule and the company has yet to make much profit from that line of business. Speaking about Tesla’s robotaxi fleet during Wednesday’s earnings call, Chief Financial Officer Vaibhav Taneja said that because Tesla is still in the “early stages” of fleet deployment and is still undergoing extensive validation and testing, “it doesn’t make sense to discuss revenue and cost per mile at this time.”
Taneja also talked about the investment in xAI, noting that Grok, a chatbot made by xAI, is already in use in Tesla’s fleet. “Today, if you look at Tesla cars, we’re using Grok,” he said.
Earlier this month, Musk said during an appearance at the World Economic Forum in Davos that Tesla plans to start selling the Optimus Prime robot by the end of next year. Tesla said Wednesday it will be able to produce 1 million Optimus robots per year by repurposing space at its Fremont factory.