It’s Thursday morning, January 29, 2026, and if you’ve been eyeing a Model S or Model X, consider this your final boarding call. During yesterday’s Q4 earnings call, Elon Musk gave the two cars that built Tesla’s reputation an “honorable discharge.”
The thing is, Tesla is pivotting from being a car company to what Musk calls a “Physical AI” company. Or nothing.
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The “Honorable Discharge”: Field Notes
It’s an ongoing situation where the Fremont factory is being gutted to make room for the future. Here’s the ground reality:
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The End of an Era: Production for the Model S and X will wind down next quarter (Q2 2026). These models only accounted for about 3% of sales last year, while the Model 3 and Y did the heavy lifting. Let’s be real—at $100k a pop, they were luxury relics in a market that wants $25k EVs.
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The “Optimus” Takeover: That empty space in Fremont? It’s being converted into a mass-production line for Optimus Gen 3 humanoid robots. Musk is aiming for a 1 million unit per year capacity. The thing is, Gen 3 mass production technically started last week (Jan 21) for internal factory use. Those too.
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The “TeraFab” Gamble: Musk announced Tesla needs to build its own semiconductor factory—the TeraFab. He’s worried about a “chip wall” and geopolitical risks with TSMC and Samsung. He wants logic, memory, and packaging all under one Tesla roof.
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The Financial Hit: For the first time ever, Tesla reported an annual revenue decline (down 3% to $94.8 billion). Net income for Q4 plummeted 61%. The thing is, the “Energy” side of the business (Megapacks) is the only thing keeping the lights on, growing 25% this quarter. Or nothing.
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Tesla’s 2026 Strategic Pivot
| Old World (Phasing Out) | New World (Scaling Up) | The “Real Talk” Reason |
| Model S & Model X | Optimus Humanoid Robot | Low margins vs. “Infinite” robot market. |
| External Chip Supply | Tesla TeraFab | Geopolitical “protectionism” & custom AI5 chips. |
| Human Drivers | Robotaxis (Unmonitored) | Austin tests are already running with no safety drivers. |
| Automotive Revenue | Energy & FSD Subscriptions | Cars are becoming “hardware at cost” for the software. |
And Here’s the Kicker…
Tesla is planning to dump 20 billion into Capex this year. The thing is, they’ve also agreed to invest 2 billion into xAI (Musk’s other AI company) to help with the “Grok” integration into Tesla bots. Those too.
One side comment—while Musk talks about a “million robots,” the first commercial sales to actual customers aren’t expected until late 2027. For now, the only “people” working the late shift at the Fremont plant will be made of aluminum and silicon. It’s an ongoing situation. Or nothing.
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End…
