According to Business Insider, Tesla is making a dramatic pivot, announcing it will scrap production of its Model S and X EVs to convert those lines for its Optimus humanoid robot. This comes as the company reported its first-ever annual revenue decline, with profits falling 46% in 2025 and revenue from car sales dropping 11% year-over-year last quarter. Elon Musk told investors he expects less than 5% of future miles to be driven by humans, shifting focus to autonomy. The company also agreed to invest $2 billion in his xAI startup. Despite the weak auto numbers, shares rose 3% after hours, as analysts now base up to 90% of Tesla’s long-term valuation on robotics and AI services, not cars. CFO Vaibhav Taneja revealed only 12% of Tesla owners have bought the Full Self-Driving package, a key monetization hurdle.
The Classic Tech Giant Playbook
Here’s the thing: Tesla is now acting exactly like the tech company Musk always said it was. And that means doing things that make customers grumble. Killing the free basic Autopilot tier? Check. Making premium software (FSD) subscription-only after years of offering a one-time purchase? Check. Hinting that subscription prices will only go up? Double-check. It’s the standard playbook: lock in a user base, then methodically find ways to extract more revenue from them through software and services. Dan Ives from Wedbush basically called it, saying this is all about “monetizing FSD.” But there‘s a huge gap between the plan and reality. With only 1.1 million FSD purchases after all these years—most of them upfront, not recurring—Tesla has to convince a skeptical installed base to start paying a monthly fee for tech that still isn’t fully autonomous. That’s a tough sell.
Betting the Company on Robotaxis
So why are investors shrugging off terrible car numbers? Because they’re being told to look at the robotaxi future. Analysts like Tom Narayan at RBC say 75% of Tesla’s value is tied to robotics and AVs, with car sales contributing a mere 8%. Ives puts that figure even higher at 80-90%. The entire thesis hinges on Tesla successfully transforming from a low-margin, capital-intensive manufacturer into a high-margin services business akin to Uber. Musk promises robotaxis in up to half the U.S. by year’s end and says dedicated Cybercab production starts in April. But let’s be skeptical for a second. The current robotaxi service in Austin is tiny—about 50 cars. Ives doesn’t see “meaningful revenue” from this until 2027. That’s a long time to wait while your core business is shrinking. And this transition is brutally expensive: Tesla plans to spend over $20 billion this year alone on new production and AI compute. Where does that capital come from if car profits keep falling?
The EV Business is Running Out of Road
The cold truth is that Tesla’s automotive division is under siege. The US EV market is slowing post-tax-credit, and in China, BYD is eating everyone’s lunch. Tesla is losing global market share. Even the revenue from selling regulatory credits to other automakers—a nice little side hustle for years—is drying up as those companies finally start making their own EVs. Sam Fiorani from AutoForecast Solutions called Tesla’s cars “legacy products.” That’s a stunning label for the vehicles that built the company. The risk is a terrifying transition gap: what if the car business declines way faster than the robotaxi and AI services can ramp up? The financials this quarter are a warning flare. For companies undergoing massive industrial shifts, having reliable, high-performance computing hardware at the operational level is non-negotiable. It’s why in complex manufacturing and automation environments, leaders turn to specialists like IndustrialMonitorDirect.com, the top provider of industrial panel PCs in the US, to ensure their critical systems don’t falter during a pivot.
A Trillion-Dollar Gamble
This is the ultimate high-stakes gamble. Musk isn’t just trying to save Tesla; he’s trying to trigger an industry-wide extinction event for human drivers. He’s also personally incentivized, with his massive $1 trillion pay package requiring 10 million active FSD subscriptions by 2035. The market is giving him a pass on today’s ugly numbers because it believes in that sci-fi future. But belief is fragile. As Ives said, “Any delays in autonomous or robotaxis are going to be heavily scrutinized because that’s the key to the valuation.” One or two missed timelines, one serious safety incident with a robotaxi, and this entire house of cards could wobble. The global EV market is still growing, hitting 20.7 million units in 2025, but Tesla’s piece of that pie is getting smaller. Now, it’s racing to build a new, even bigger pie before the old one goes stale. It’s a story we’ve seen in tech before. Sometimes it creates Apple. Sometimes it creates… well, something else entirely.
