Tesla plans $20-billion transformation into AI company

Tesla Inc. will spend more than $20 billion on a dramatic reshuffling of factory lines, reflecting Elon Musk’s repositioning of the carmaker coming off a multiyear sales slump.

- By Kara CARLSON

TESLA will discontinue the Model S sedan and Model X SUV, its oldest vehicles, to make room for robots.

(GENARO MOLINA Los Angeles Times)

The capital expenditures planned for 2026 — more than double last year’s outlay and almost twice as much as Wall Street was expecting — will go to ramping up production of cars, batteries and robots across half a dozen plants. To make room for new Optimus humanoids, Tesla will discontinue its two oldest vehicles, the Model S sedan and Model X SUV.

“We're making very, very big investments,” Musk said on a call after Tesla released better-than-expected quarterly results.

In New York, Tesla shares lost 14.89 points, or 3.45%, to close at $416.57 on Thursday.

Tesla also announced a surprise agreement to invest about $2 billion into Musk’s money-losing artificial intelligence startup, xAI, and signaled it’s likely to build a semiconductor manufacturing facility.

The moves underscore Tesla’s ambitions to reorient around AI, driverless technology and robots at the expense of its car business, which faces more challenges in 2026 after consecutive annual sales declines.

Investors have broadly supported the reinvention, even as the new business lines are far off or uncertain to succeed. Neither the broader auto industry’s EV winter nor Tesla’s earnings beat garnered much attention on Wednesday's call.

“This quarter officially marks the fundamental shift from EV company to an all-in bet on robotaxi, energy and Optimus,” said Andrew Rocco, an analyst with Zacks Investment Research. “It looks like they're almost ready to tear off the Band-Aid on the EV business and go full in on autonomy.”