Tesla is preparing for a sweeping transformation that will shift the company away from its roots as an electric vehicle maker and toward artificial intelligence, humanoid robots and autonomous driving, committing roughly $20 billion in capital spending this year to fund the transition.
At its Fremont, California, factory — long associated with the production of Tesla’s earliest and most iconic vehicles — the company plans to replace older car lines with manufacturing dedicated to robots. The move underscores what analysts describe as a decisive break from Tesla’s past.
“Forget the Tesla you knew,” analysts at Canaccord Genuity wrote in a note following the company’s fourth-quarter earnings report. “The Tesla of yesterday is gone. We believe Elon Musk has reached a definitive ‘burn the ships’ inflection point — a total commitment to a vision that leaves no room for retreat.” The firm reiterated its buy recommendation on the stock.
Tesla disclosed Wednesday that capital expenditures will more than double in 2026, reversing a sharp pullback last year when spending fell 24% to $8.6 billion. The increase reflects a strategic pivot away from electric vehicles and deeper into AI-driven technologies, including driverless systems, humanoid robots and, eventually, in-house semiconductor manufacturing.
Despite the long-term ambitions, investors reacted cautiously. Tesla shares fell 3.5% on the day to close at $417.89, bringing the stock’s January decline to more than 7%.
The shift comes as Tesla’s core automotive business shows signs of strain. Automotive revenue — still accounting for roughly 70% of total sales — declined 10% in 2025. The company faced intensifying competition worldwide, particularly from China’s BYD and European automakers Volkswagen and BMW, while failing to introduce significant new EV models. Total revenue fell last year for the first time in Tesla’s history.
On the earnings call, Musk said Tesla will end production of its Model S sedan and Model X SUVs. While the vehicles represented less than 3% of delivery volume last year, they played a critical role in making electric vehicles mainstream.
The Fremont production lines previously used for those models will be repurposed to manufacture Optimus, Tesla’s humanoid robot. Musk described Optimus as a bipedal, intelligent machine that could eventually perform tasks ranging from factory work to surgery and childcare. However, he acknowledged that the robots are not yet being used in Tesla facilities “in a material way.”
Musk has repeatedly highlighted Optimus as central to Tesla’s future. In 2024, he said the robot could eventually make Tesla a $25 trillion company — compared with its current market capitalization of about $1.4 trillion — and later suggested that 80% of Tesla’s long-term value could come from robotics.
Tesla did not specify how much of this year’s $20 billion spending plan will be allocated to Optimus. Chief Financial Officer Vaibhav Taneja said the funds will be spread across six factories and multiple initiatives, including a battery storage refinery, development of the driverless Cybercab, the Semi electric truck and the Optimus robot factory.
“On top of it, we’ll also be spending money for building our AI compute infrastructure,” Taneja said, adding that Tesla will continue expanding capacity at existing plants and investing in related infrastructure.
While Musk said Tesla aims to build an Optimus production line capable of manufacturing one million units annually, he emphasized that the project remains in its early stages.
“We’re still very much at the early stages of Optimus,” Musk said, calling it a research and development effort. He added that significant production volumes are unlikely before the end of this year — a timeline investors may view cautiously given Musk’s history of missed deadlines.
Beyond robotics, Tesla is accelerating its efforts in autonomous transportation. The company plans to expand its Robotaxi ride-hailing fleet across the United States while continuing work on a fully self-driving system that does not require a human driver to remain ready to intervene.
In 2025, Tesla launched a Robotaxi-branded ride-hailing app and began pilot operations in Austin, Texas. Last week, executives said human safety supervisors had been removed from a small number of vehicles in Austin to conduct fully driverless passenger rides. Tesla also began operating a service in the San Francisco area last year, though those vehicles still have drivers behind the wheel.
According to its investor presentation, Tesla expects to launch Robotaxi coverage in seven additional U.S. markets in the first half of this year: Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas.
The company faces stiff competition in autonomous mobility, including Alphabet’s Waymo, which is rapidly expanding in the U.S., and Baidu’s Apollo Go in China.
Musk also signaled that Tesla expects to spend heavily on semiconductor capabilities, citing constraints among suppliers such as Samsung, Taiwan Semiconductor Manufacturing Co. and Micron.
“In order to remove the constraint, the probable constraint in three or four years, we’re going to have to build a Tesla TeraFab,” Musk said, describing a large domestic facility encompassing logic, memory and chip packaging. He added that the move would help protect Tesla from geopolitical risks.
“We’re going to be paranoid and make sure that we can continue to build batteries and robots and AI chips no matter what happens,” Musk said.
Taneja clarified that this year’s $20 billion spending target does not include plans for a TeraFab, nor does it account for Musk’s longer-term vision of launching solar cell manufacturing in the United States.
Analysts at Barclays, who rate Tesla’s stock as a hold, said the end of the Model S and X represents a symbolic turning point.
“While autos may still be the company’s core business, the end of the Model S and X marks the symbolic baton pass into ‘physical AI,’” the analysts wrote. “In case it wasn’t clear before, it’s more than abundantly clear now that Tesla is not an auto company.”
As Tesla embarks on one of the most ambitious transformations in its history, investors and competitors alike are watching closely to see whether Musk’s vision of robots, autonomy and AI can deliver growth at a scale once driven by electric cars.
