The death of the Model S and Model X signal a new era for Tesla: the end of its traditional car business.
The death of the Model S and Model X signal a new era for Tesla: the end of its traditional car business.
is transportation editor with 10+ years of experience who covers EVs, public transportation, and aviation. His work has appeared in The New York Daily News and City & State.
Is Tesla still a car company? It’s a question we’ve been asking ourselves more frequently over the past year, especially as the company’s car business shrinks and Elon Musk continues to push the message that Tesla should be seen more as an AI and robotics leader and less so as a mere seller of four-wheeled conveyance.
Last night during Telsa’s quarterly earnings call, the question of whether Tesla still wants to sell cars was seemingly answered by Musk and his lieutenants. In one fell swoop, the company killed off its original flagship EVs, the Model S and Model X, to make room for the mass production of a humanoid robot that, as we’ve seen numerous times, struggles with basic tasks. A top Tesla executive said that the company should be viewed more as “transportation as a service” than as an automaker. And Musk repeated his assertion that Tesla didn’t need to make more mass-market vehicles because, in the future, all cars will be autonomous.
“The vast majority of miles traveled will be autonomous in the future,” Musk said. “You know, I would say probably less than—I’m just guessing—but probably less than 5 percent of miles driven will be where somebody’s actually driving the car themselves in the future, maybe as low as 1 percent.”
And a bit later, Musk doubled down. “So, you know, I think long-term… the only vehicles that we’ll make will be autonomous vehicles.”
To be sure, Tesla still makes and sells cars, but based on Musk’s comments and actions, it feels like Tesla is a car company in name only. In 2025, Tesla brought in $94.8 billion in revenue, $69.5 billion — or 73 percent — of which was from car sales. Its automotive revenues have been in free fall, down 10 percent year over year, while its other revenue streams — energy generation and storage; and services and other revenue — are on the upswing.
This year, Tesla lost its title as the global leader in EV sales to BYD. Its two main vehicle programs, the Model 3 and Model Y, are in decline, despite efforts to introduce more affordable versions of both vehicles. Globally, EV tax credits and other incentive programs that helped bring down costs and make these vehicles affordable to more people are going away — which Musk had a hand in, thanks to his donations and support for Donald Trump. And Musk’s political activities, and his divisive public persona, have turned the Tesla brand toxic for a broad swath of the company’s progressive customer base.
Like many tech companies before it, Tesla is pinning its hopes on a future driven by subscription revenue. For the first time, the company disclosed the number of active Full Self-Driving (Supervised) subscriptions — 1.1 million — which Musk claimed was a 38 percent increase over the fourth quarter 2024. Musk recently said that Tesla would stop selling its Full Self-Driving feature as a standalone package and shift to subscription only.
FSD allows for hands-free driving on highways and urban areas, but drivers are required to keep their eyes on the road and be ready to take control if something goes wrong. Tesla has faced numerous lawsuits and investigations over the years related to the safety and marketing of FSD.
But to Musk, FSD and robotaxis are the future. He predicted that Tesla’s autonomous taxis will be available in “dozens” of US cities this year, after falling short of his previously stated expansion plans. And he touted the imminent reveal of a “Gen 3” version of Tesla’s Optimus robot, which he said would be ready for mass production at the end of 2027.
Autonomy isn’t just key to Tesla’s future; it’s also key to Musk unlocking a pay package worth up to $1 trillion for himself. Musk made a bet with shareholders: give me control over a robot army, and I’ll make you all rich. Under the deal, he would need to meet a series of ambitious milestones to receive the compensation, including producing over a million robots, a million robotaxis, and creating $7.5 trillion in value for Tesla’s shareholders.
But look at the requirements in the agreement, someone who doubts the premise of this article might say. Tesla still needs to sell millions of cars in order for Musk to become the world’s first trillionaire, right? The vehicle sales milestone is actually a pretty easy layup. If Tesla sells 1.2 million cars a year over the next decade, on average, Musk earns $8.2 billion in stock — as long as Tesla’s market value grows from $1.4 trillion today to $2 trillion in 2035. That’s a half-million fewer cars per year than Tesla sold in 2024. The decline in Tesla’s vehicle-selling business appears to be baked into the premise of Musk’s pay package.
It’s important to note that the death of Tesla’s car business has been enabled every step of the way by Tesla’s board and its shareholders. They completely buy Musk’s vision of a future dominated by AI, self-driving cars, and humanoid robots. This in spite of Tesla’s difficulty in keeping pace with Waymo’s robotaxis and the clear shortcomings of its Optimus robots. Its robotaxis are crashing at a higher rate than human drivers, even with safety drivers in the vehicle, according to federal crash data reported by Electrek. And its robots are mostly remote operated and struggle with basic tasks. Musk himself admitted in the earnings call that Optimus is not currently working in Tesla’s factories “in a material way.”
But Tesla’s moves to pivot away from the quotidian business of making and selling cars is not happening in isolation. Broadly, the long-term goal for many automakers is to build so-called software-defined vehicles, an industry term that describes connected vehicles that can continuously improve over time through over-the-air software updates. And the companies’ main goal is to get its customers to pay for those upgrades through subscriptions. And why not? Making cars is a brutal, labor intensive, low-margin business. Who wouldn’t want some of that sweet, sweet recurring revenue you get from subscription services?
But Tesla isn’t going to sell enough FSD subscriptions to make up for main source of its revenue, which is selling cars — not in the near term, and probably not in the long term either, given the slow pace of autonomy development. And now, with the death of the Model S and Model X, it has two fewer cars in its lineup to rely on.
Chasing the robot/robotaxi dream is enormously expensive: Tesla estimates it will spend $20 billion in capital expenditures in 2026, more than double the $8.5 billion it spent last year. Most of the record investment will be spent on production lines for the Cybercab, a fully autonomous vehicle without a steering wheel and pedals, the long-promised Tesla semi-truck, Optimus robots, and plants for battery and lithium production, chief financial officer Vaibhav Taneja said.
Toward the end of the earnings call, Musk admitted that a lot of that spending will be “out of desperation.”
“Like, why do we have to build these things?” he said, citing lithium and cathode refineries as among the things Tesla needs to build to fuel its transformation. “Can someone else build these things? I mean, it’s very hard to build these things.”