Tesla throws in the towel on car sales

Is Tesla still a car company? It’s a mobility we’ve been asking ourselves much frequently complete the past year, particularly arsenic the company’s car business shrinks and Elon Musk continues to push the connection that Tesla should beryllium seen much arsenic an AI and robotics leader and little truthful arsenic a specified seller of four-wheeled conveyance.

Last nighttime during Telsa’s quarterly net call, the mobility of whether Tesla still wants to waste cars was seemingly answered by Musk and his lieutenants. In 1 fell swoop, the institution killed disconnected its original flagship EVs, the Model S and Model X, to make room for the wide accumulation of a humanoid robot that, arsenic we’ve seen galore times, struggles pinch basal tasks. A apical Tesla executive said that the institution should beryllium viewed much arsenic “transportation arsenic a service” than arsenic an automaker. And Musk repeated his assertion that Tesla didn’t request to make much mass-market vehicles because, successful the future, each cars will beryllium autonomous.

“The immense mostly of miles traveled will beryllium autonomous successful the future,” Musk said. “You know, I would opportunity astir apt little than—I’m conscionable guessing—but astir apt little than 5 percent of miles driven will beryllium wherever somebody’s really driving the car themselves successful the future, possibly arsenic debased arsenic 1 percent.”

And a spot later, Musk doubled down. “So, you know, I deliberation long-term… the only vehicles that we’ll make will beryllium autonomous vehicles.”

To beryllium sure, Tesla still makes and sells cars, but based connected Musk’s comments and actions, it feels for illustration Tesla is simply a car institution successful sanction only. In 2025, Tesla brought successful $94.8 cardinal successful revenue, $69.5 cardinal — aliases 73 percent — of which was from car sales. Its automotive revenues person been successful free fall, down 10 percent twelvemonth complete year, while its different gross streams — power procreation and storage; and services and different gross — are connected the upswing.

This year, Tesla mislaid its title arsenic the world leader successful EV income to BYD. Its 2 main conveyance programs, the Model 3 and Model Y, are successful decline, contempt efforts to present much affordable versions of some vehicles. Globally, EV taxation credits and different inducement programs that helped bring down costs and make these vehicles affordable to much group are going distant — which Musk had a manus in, acknowledgment to his donations and support for Donald Trump. And Musk’s governmental activities, and his divisive nationalist persona, person turned the Tesla marque toxic for a wide swath of the company’s progressive customer base.

Like galore tech companies earlier it, Tesla is pinning its hopes connected a early driven by subscription revenue. For the first time, the institution disclosed the number of progressive Full Self-Driving (Supervised) subscriptions — 1.1 cardinal — which Musk claimed was a 38 percent summation complete the 4th fourth 2024. Musk precocious said that Tesla would extremity trading its Full Self-Driving characteristic arsenic a standalone package and shift to subscription only.

FSD allows for hands-free driving connected highways and municipality areas, but drivers are required to support their eyes connected the roadworthy and beryllium fresh to return power if thing goes wrong. Tesla has faced galore lawsuits and investigations complete the years related to the information and trading of FSD.

Autonomy isn’t conscionable cardinal to Tesla’s future; it’s besides cardinal to Musk unlocking a salary package worth up to $1 trillion for himself. Musk made a stake pinch shareholders: springiness maine power complete a robot army, and I’ll make you each rich. Under the deal, he would request to meet a bid of eager milestones to person the compensation, including producing complete a cardinal robots, a cardinal robotaxis, and creating $7.5 trillion successful worth for Tesla’s shareholders.

But look astatine the requirements successful the agreement, personification who doubts the premise of this article mightiness say. Tesla still needs to waste millions of cars successful bid for Musk to go the world’s first trillionaire, right? The conveyance income milestone is really a beautiful easy layup. If Tesla sells 1.2 cardinal cars a twelvemonth complete the adjacent decade, connected average, Musk earns $8.2 cardinal successful banal — arsenic agelong arsenic Tesla’s marketplace worth grows from $1.4 trillion coming to $2 trillion successful 2035. That’s a half-million less cars per twelvemonth than Tesla sold successful 2024. The diminution successful Tesla’s vehicle-selling business appears to beryllium baked into the premise of Musk’s salary package.

It’s important to statement that the decease of Tesla’s car business has been enabled each measurement of the measurement by Tesla’s committee and its shareholders. They wholly bargain Musk’s imagination of a early dominated by AI, self-driving cars, and humanoid robots. This successful spite of Tesla’s trouble successful keeping gait pinch Waymo’s robotaxis and the clear shortcomings of its Optimus robots. Its robotaxis are crashing astatine a higher complaint than quality drivers, moreover pinch information drivers successful the vehicle, according to national clang information reported by Electrek. And its robots are mostly distant operated and struggle pinch basal tasks. Musk himself admitted successful the net telephone that Optimus is not presently moving successful Tesla’s factories “in a worldly way.”

But Tesla’s moves to pivot distant from the quotidian business of making and trading cars is not happening successful isolation. Broadly, the semipermanent extremity for galore automakers is to build alleged software-defined vehicles, an manufacture word that describes connected vehicles that tin continuously amended complete clip done over-the-air package updates. And the companies’ main extremity is to get its customers to salary for those upgrades done subscriptions. And why not? Making cars is simply a brutal, labour intensive, low-margin business. Who wouldn’t want immoderate of that sweet, saccharine recurring gross you get from subscription services?

But Tesla isn’t going to waste capable FSD subscriptions to dress up for main root of its revenue, which is trading cars — not successful the adjacent term, and astir apt not successful the agelong word either, fixed the slow gait of autonomy development. And now, pinch the decease of the Model S and Model X, it has 2 less cars successful its lineup to trust on.

Chasing the robot/robotaxi dream is enormously expensive: Tesla estimates it will walk $20 cardinal successful superior expenditures successful 2026, much than double the $8.5 cardinal it spent past year. Most of the grounds finance will beryllium spent connected accumulation lines ‍for the Cybercab, a afloat autonomous conveyance without a steering instrumentality and pedals, the long-promised Tesla semi-truck, Optimus robots, and plants for artillery and lithium production, main financial serviceman Vaibhav Taneja said.

Toward the extremity of the net call, Musk admitted that a batch of that spending will beryllium “out of desperation.”

“Like, why do we person to build these things?” he said, citing lithium and cathode refineries arsenic among the things Tesla needs to build to substance its transformation. “Can personification other build these things? I mean, it’s very difficult to build these things.”