Recently, Tesla held its Q4 2025 financial results conference call, revealing a shift from a pure car sales model to a Physical AI and subscription-based revenue approach.

Tesla previously led the development of electric vehicles and is now pioneering the development of Physical AI. Tesla's conference call information is always worth paying attention to, with various companies vying to interpret it at a pixel level. This article shares the core information from Tesla's Q4 2025 financial results conference call and Vehicle's interpretation. For those interested in a pixel-level interpretation, click on the full Chinese transcript of the conference call: 'Tesla Q4 2025 Financial Results Conference Call Full Chinese Transcript'.

Financially and in terms of sales, Tesla has seen various declines:

Total annual revenue: $94.8 billion, a 3% year-over-year decrease. Automotive business revenue: $69.5 billion, a 10% year-over-year decrease. However, energy storage and energy business revenue increased by 27% year-over-year to $12.7 billion, and service business revenue increased by 19% year-over-year to $12.5 billion.

Sales: Annual deliveries reached approximately 1.636 million units, a 9% year-over-year decrease. Q4 deliveries: 418,000 units, a 16% year-over-year decrease, indicating a continuous decline in deliveries for Tesla's current product portfolio.

Annual net profit (GAAP): $3.794 billion, a 46% year-over-year decrease. Q4 net profit (GAAP): $840 million, a 61% year-over-year decrease. Without a $524 million subsidy from regulatory authorities, Tesla's Q4 performance would have been even worse. Another issue is that Q4 operating expenses increased by 39% to $3.6 billion, primarily driven by increases in AI, R&D projects, and SG&A (selling, general, and administrative expenses).

In terms of sales and finances, Tesla has experienced a second consecutive year of declining deliveries and profits, while the global electric vehicle market continues to grow. Now, BYD has taken the throne as the world's largest electric vehicle manufacturer. Tesla's once industry-leading profit margins are also facing pressure from Chinese competitors.

These factors may have prompted Elon Musk to hasten the change in narrative.

Strategic Transformation and New Mission:

At the beginning of the conference call, Elon Musk set the tone by updating Tesla's mission to 'Build a World of Amazing Abundance,' aiming to achieve a future of high income for all through AI and robotics technology.

Tesla's previous mission was 'To accelerate the world's transition to sustainable energy.' This mission aimed to drive the global energy structure from fossil fuels to clean energy through electric vehicles, solar panels, and energy storage solutions.

If so, as Musk said, China can be considered as truly and comprehensively practicing this mission.

Tesla's new mission focuses on a comprehensive shift towards AI and robotics. The company is transitioning from a pure electric vehicle manufacturer to an AI and robotics giant, with future core growth drivers coming from autonomous driving software and Optimus robots, these Physical AIs.

Major Adjustments to the Automotive Product Line:

To implement these strategies, Musk announced a series of product adjustments and implementation directions.

Firstly, discontinuation of Model S/X: Tesla announced that it will gradually cease production of the Model S and Model X in the first quarter of 2026. These two models, with a combined annual sales volume of just over 10,000 units, will be discontinued. The production line for the Model S/X at the original Fremont factory will be transformed into an Optimus robot factory, with a long-term goal of producing 1 million Optimus robots annually.

Accelerated production of Cybercab (Robotaxi): Musk stated that production of the Cybercab (Robotaxi) is expected to begin in April 2026. It will feature no steering wheel or pedals and is designed for high-intensity use (50-60 hours per week) at a very low cost. Production is expected to eventually surpass the combined total of all other models.

Next-generation Roadster: Expected to be unveiled in April 2026.

As for other products, there are no new plans for the Model 3/Y, and the Cybertruck will temporarily remain unchanged and will not be produced as a more traditionally styled pickup truck as previously mentioned.

Therefore, for automotive products, Tesla's future growth will rely entirely on the existing Model 3/Y and the future Cybercab.

Physical AI's FSD and Humanoid Robot Optimus:

The main attractions of Physical AI are FSD and the humanoid robot Optimus.

Autonomous Driving (FSD) and Fleet Operations, Unsupervised FSD Progress: Tesla has achieved fully autonomous driving tests without safety drivers or follow cars in Austin. According to the conference call, Tesla currently has over 500 paid Robotaxis in operation. Musk stated that the number of these Robotaxis could double every month, indicating exponential growth. It is expected that autonomous driving will be expanded to approximately one-fourth to half of the United States by the end of 2026, of course, subject to regulatory approval.

Tesla now has 1.1 million global paid FSD users. The company announced in mid-January that FSD will fully transition to a subscription model at $99 per month, with no more support for outright purchases. Additionally, on January 29, Tesla offered existing owners who had spent $6,000 on Enhanced Autopilot (EAP) an upgrade to FSD for just $49 per month (the differences between Basic Autopilot, EAP, and FSD).

Furthermore, Musk mentioned the future introduction of a fleet mode similar to 'Airbnb,' where owners can add or remove their vehicles from Tesla's autonomous driving fleet at any time to earn revenue.

Therefore, Tesla's FSD will fully transition to a subscription model, transforming Tesla into a company similar to Apple in terms of its integrated hardware and software business model. Regardless of whether it's the Model 3/Y or even the Cybercab (a mobile travel tool similar to a network communication device), they are all hardware carriers for FSD (a mobile travel service similar to communication and cloud services), with hardware sales combined with FSD driving service subscription fees.

Robots (Optimus): Although Musk repeatedly emphasized that Optimus plans to produce 1 million units annually and will be much larger than the automotive business, according to the Q4 conference call, Optimus is not currently performing work in factories but is being studied and learned by users.

Optimus Gen 3, which possesses general learning capabilities (according to Musk, the humanoid robot can learn by observing human behavior, through language education, or video learning), is expected to be released around mid-year. If achieved, it would essentially be truly human-like, as human growth also involves continuous education, observation, and practical learning.

Regarding the production and ramp-up time for Optimus, there appears to be significant uncertainty based on Musk's statements, as he has consistently mentioned that Optimus's supply chain is entirely new, with no existing components in its current supply chain. Everything is designed based on the fundamental principles of physics, and Optimus's production ramp-up curve (usually an S-shaped curve) will be much longer than products that at least partially rely on existing supply chains.

Therefore, the current focus for Optimus is to develop the product. The business model has not been mentioned, but it is estimated that it will also follow a hardware purchase fee plus software subscription fee approach.

xAI Collaboration and Grok Integration: Tesla confirmed that its investment in xAI is part of a strategic plan, with an expected investment of $2 billion. Why?

Recently, the integration of FSD and Grok has provided a clear experience in vehicle control. Grok can not only serve as an entry point for automotive interaction but also, in the future, Tesla expects the Grok model to act as a 'conductor,' managing a vast fleet of tens of millions of autonomous vehicles and millions of Optimus robots, optimizing efficiency.

Strategic Logistical Support:

To ensure the success of its strategic transformation and mitigate geopolitical risks, according to Musk's original statement, 'to ensure that autonomous vehicles and humanoid robots can be mass-produced and to address geopolitical risks,' Tesla expects to spend over $20 billion in 2026 on the construction of six factories.

Lithium Refinery - Located near Texas Robstown/Corpus Christi, Musk claims it to be the 'largest lithium refinery in the United States,' with a target capacity of 30 GWh equivalent.

LFP Battery Factory - Primarily in Nevada (Gigafactory Nevada), with production scheduled to begin in 2026 (Q1 or first half of the year). It is a collaboration between Tesla and CATL for localized LFP battery cells, primarily for energy storage (Powerwall/Megapack) and low-cost vehicle models. Initial capacity is planned to be 7-10 GWh per year, with plans for expansion.

Cybercab Production Factory - Primarily at Giga Texas (Austin), with tool installation underway for the production line, aiming to produce millions of units annually (across multiple factories) using the unboxed process.

Tesla Semi Production Factory - A dedicated factory under construction near Gigafactory Nevada in Nevada, with tooling and construction nearly complete. Production line equipment installation is underway, with the first 'online builds' scheduled for the first half of 2026 and mass production ramping up in the second half. Early deliveries will go to customers like PepsiCo to continue accumulating data. The target annual production is 50,000 units.

New Megafactory (a new giant factory for energy storage) - In Houston/Brookshire, Texas (the third Megafactory), under construction (ground broken, with an investment of nearly $200 million). The former warehouse is being transformed, and equipment installation has commenced. Megapack 3/Megablock production is scheduled to begin in late 2026 or the first half of the year, with a maximum capacity of 50 GWh per year.

Optimus Factory - The Fremont factory (transformation of the Model S/X production line) is undergoing retooling. Gen 3 Optimus (with the latest hand design) is planned to be unveiled in Q1, marking the first mass-produced version. The first production line installation is underway, with a target annual production of 1 million units in this space. Future plans include building higher-capacity lines at Giga Texas (Optimus V4, targeting tens of millions of units).

In addition to the $20 billion investment, Tesla is also investing in solar cell manufacturing plants and semiconductor chip manufacturing plants.

Self-built Wafer Fab (Terafab): Elon Musk and the executive team emphasized that to address chip capacity bottlenecks (especially for memory) and geopolitical risks in the next 3-4 years, Tesla must build a trillion-dollar wafer fab in the United States that integrates logic, storage, and packaging. Musk believes that the urgency for AI storage capacity may surpass that for computing chips in the future, similar to the current logic of chip price increases in the automotive industry, which will have a high demand for storage this year.

AI Chips: Currently focused on the AI5 chip design, with plans to launch AI6 within a year. In the short term, all chips will be for self-use and not for external sales. However, with AI5 not yet released and AI6 scheduled to be launched within a year, it puts AI5 in an awkward position.

Tesla stated that for solar panels, it aims to achieve an annual production capacity of 100 gigawatts of solar cells and integrate the entire supply chain from raw materials to finished solar panels.

To safeguard Tesla's strategic navigation, the company is focusing on achieving geopolitical controllability in product technologies such as energy batteries and computing chips. However, the components for Tesla's Optimus remain a mystery. Does North America have such a complete supply chain under current geopolitical conditions?

Conclusion: A Crossroads of Divergence

For the global automotive industry, this moment may represent a historic watershed: To the left lies the ultimate 'manufacturing logic' - like BYD, relying on strong supply chain integration capabilities to compete on cost, scale, and configuration, pushing the cost performance (cost-performance ratio) of industrial products to the extreme and becoming the undisputed 'king of manufacturing.' To the right lies the ultimate 'silicon-based logic' - like what Tesla is doing now, devaluing hardware to mere 'AI containers' and selling 'computing power' and 'labor' (Robotaxi and Optimus) through subscriptions, attempting to become the 'silicon-based lord' mastering Physical AI.

For those of us in the automotive industry, perhaps it's time to reconsider a question:

Who will be the king of the next era? Will it be those striving hard to master the 'art of car-making', or this mad gambler attempting to transform the physical world into an 'App Store'?

The outcome of this high-stakes gamble may also completely redefine the four words 'automotive industry'. What's your take on this? Feel free to leave your opinions in the comments section.

References and Images

Tesla Q4 2025 Financial Report PPT

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