Author | Meng Xiao For more financial information | BT Financial Data Pass The main text comprises 4,678 words, with an expected reading duration of 9 minutes.

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The iconic Tesla flagships, the Model S and Model X, are nearing their final curtain call. Musk's decision signals Tesla's decisive pivot from being merely an 'electric vehicle manufacturer' to evolving into an 'AI + robotics company'.

As the Fremont factory's production lines are repurposed for the humanoid robot Optimus, and as the business scope broadens to encompass energy closed loops, smart homes, and even autonomous taxi networks, Musk has astutely recognized that Tesla's potential will no longer be constrained by vehicle sales but by the profound integration of AI technologies and automation services.

Behind these radical transformations lies Tesla's engagement with China's burgeoning tech landscape. As the wave of intelligence in China's automotive industry sweeps across the globe, Tesla's strategic shift may foreshadow China's ascent as the de facto global tech leader and standard-setter.

Tesla's final quarterly and full-year financial reports for 2025 have sent shockwaves through the industry. The company reported its first-ever performance downturn since inception, with revenue declining by 3% compared to 2024. Net profit attributable to shareholders plummeted by nearly half, reaching only $3.794 billion, a 46% decrease from 2024. The fourth quarter of 2025 witnessed an even steeper year-on-year drop in net profit attributable to shareholders, at 61%. In the domestic market, Tesla found itself in a predicament where even price reductions failed to revive sales, slipping from its former position of absolute leadership to fifth place in sales volume.

Tesla's stock performance in 2026 has also been lackluster. As of the February 26 close of the U.S. stock market, Tesla's stock price stood at $408.58, down approximately 11% year-to-date, with its market capitalization shrinking by about $184.4 billion. Calculated at the latest exchange rate of 6.8554, Tesla's market cap has diminished by 1.3 trillion yuan since the start of 2026.

What has led to this situation? The financial reports offer some insights, primarily citing fewer vehicle deliveries last year, coupled with increased R&D investments and operational expenditures, further squeezing profit margins. But is this truly the main cause?

Recently, Tesla held its Q4 2025 earnings call, where founder and CEO Elon Musk boldly proclaimed that Tesla would officially halt production of its two high-end models, the Model S and Model X, by the end of Q2 2026. Musk's announcement stunned the global automotive community, as he believed the missions of the Model S and X had been accomplished, allowing them to bow out gracefully. This decision marks the official conclusion of Tesla's luxury car era.

Simultaneously, Tesla's Fremont factory in California will undergo a complete overhaul, with the original Model S/X production lines being repurposed into a mass production base for Optimus humanoid robots, aiming for an annual output of 1 million units. A transition from 'electric vehicle manufacturer' to 'AI + robotics company' has officially commenced.

Musk envisions Tesla's strategy extending beyond vehicle manufacturing. To meet users' power demands, the company will venture into energy production and management, creating a closed loop of 'power generation-storage-consumption' through energy storage products and solar power systems. On the other hand, Tesla will transfer control and algorithmic capabilities from autonomous driving to new scenarios like humanoid robots, achieving vertical expansion of core technologies. More surprisingly, Musk has also ventured into real estate, with Tesla officially launching smart homes centered around energy, AI, and vehicle-home interconnection, creating truly futuristic living spaces.

While approximately 80% of Tesla's revenue still stems from its automotive business, Musk has repeatedly painted a vision of the automotive industry's intelligent and networked future at earnings calls over the past two years. Has Musk truly lost interest in car manufacturing?

1

Is Musk Pursuing a Strategic Transformation?

Tesla was once Musk's 'greatest passion.' For years, he slept on the office floor at Tesla's factories, working over 120 hours per week, averaging more than 17 hours daily, dedicating nearly all his energy to Tesla. Over time, he mastered time management at Tesla, dedicating the first 10 hours daily to Tesla, focusing on engineering details and production line optimization; only after 6 PM would he switch to other businesses, with one-on-one briefings often delayed until 11 PM to 1 AM. At that time, Tesla was Musk's pride and joy.

Musk bluntly stated, 'I sleep on the factory floor, hoping to be in a worse situation than anyone else; when employees hurt, I hurt more.' He also acknowledged, 'No one should work this hard; it's harmful to the brain and heart.' But aside from having his children around, Musk maintained a seven-day-a-week office sleep schedule.

During Tesla's globalization, wherever a Tesla factory existed, Musk's presence was inevitable. Especially at critical junctures, Musk was on-site, such as when the Berlin factory faced a fire in 2022. Musk immediately flew over to stabilize the team, closely monitored 4680 battery cells and body craftsmanship, overcame local environmental resistance, and ramped up production to over 370,000 units annually. When Panasonic battery supplies were delayed, he sent engineers to Osaka; when a driveshaft supplier withdrew, he led a team to set up a temporary production line in a parking lot, using a 'human supply chain' to ensure deliveries.

At that time, Musk poured nearly all his heart and soul into Tesla. Tesla has indeed justified Musk's efforts. According to mainstream billionaire rankings, Musk topped the global rich list four times thanks to Tesla, all between 2021 and 2025. Around 70-80% of his wealth comes from Tesla stock, with each peak driven by Tesla's soaring stock price. For instance, in November 2021, Musk became the first person worldwide with a net worth exceeding $300 billion, primarily due to Tesla's market cap surpassing $1 trillion.

In recent years, Musk's wealth has surged again, but Tesla's contribution has significantly diminished. With his space exploration company SpaceX merging with AI firm xAI, Musk's personal wealth surpassed $800 billion for the first time, making him the first person to cross that threshold and solidifying his position as the world's richest person. This wealth surge primarily came from SpaceX and AI, possibly one reason for Musk's 'shift in focus'.

During the earnings call, Musk stated, 'It's time for the Model S and Model X to retire gracefully...' 'Tesla will transform the Model S/X production space at the Fremont factory into a humanoid robot Optimus factory.' 'The only vehicles we will launch will be autonomous ones.'

The discussion revolved around dreams of Robotaxi, Cybertruck, AI, chips, and humanoid robots. Musk also clearly stated, 'In the long run, the Cybercab will be Tesla's sales pillar, with annual sales several times higher than other models.' Only upon examining this model did we find it features a two-seat layout, with traditional driving controls removed—no steering wheel, pedals, or conventional control interfaces, retaining only a central touchscreen.

When this advanced intelligent vehicle can break into the market remains to be seen and will require time to verify.

2

Tesla's Performance Rollercoaster?

According to financial reports, Tesla's global sales in 2025 reached 1.63 million units, down 8.6% year-on-year. As Tesla's longtime rival, BYD sold 4.6024 million units in 2025, up 7.73%. BYD's sales were 2.82 times Tesla's, leading by nearly 3 million units.

Quarterly sales for Tesla resembled a rollercoaster, with 336,000 units in Q1, 384,000 in Q2, 497,000 in Q3, and 418,000 in Q4. Q1 was sluggish, Q2 saw a rebound, Q3 peaked, and Q4 unexpectedly plummeted, prompting Tesla to join a price war it wished to avoid.

Tesla faced sales challenges in the Chinese market, selling 851,700 units in 2025, down 7.08% year-on-year. In January 2026, the Model Y was surpassed by Xiaomi's YU7, losing its monthly sales crown. Globally, Tesla's pure electric sales were overtaken by BYD, which sold 2.2567 million pure electric vehicles in 2025, exceeding Tesla's 1.636 million.

Tesla's sales have declined for three consecutive years, from 1.808 million in 2023 to 1.789 million in 2024, a total decline of 178,000 units over three years. Interestingly, 2023, the year with record sales, was also when Tesla implemented its largest price cuts. The Model 3 rear-wheel drive dropped from 265,900 yuan to 229,900 yuan, a 36,000 yuan reduction, while the Model Y rear-wheel drive fell from 288,900 yuan to 259,900 yuan, a 29,000 yuan cut, with full-line reductions ranging from 29,000 to 48,000 yuan, setting a record for price cuts.

To reverse the trend of declining sales, Tesla introduced various price cuts and incentives this year, including 'seven-year ultra-low interest' and 'limited-time insurance subsidies,' offering maximum sincerity and benefits to potential consumers without altering the terminal pricing system.

CPCA data shows Shanghai factory wholesale volumes reached 69,129 units in January, up 9% year-on-year. Wholesale volumes in China achieved positive growth for the third consecutive month. While these numbers seem promising, they couldn't shake the lead of the top two. BYD led with 205,518 units, followed by Geely at 124,252 units, with Tesla's wholesale volumes barely a third of BYD's.

Tesla recently released its Q4 2025 financial report, which would be explosive news for any domestic automaker. Tesla's Q4 total revenue was $24.901 billion, down 3.14% year-on-year and 11.37% quarter-on-quarter. Automotive revenue was $16.750 billion, down 10.23% year-on-year and 17.73% quarter-on-quarter.

Tesla's 2025 revenue was $94.83 billion, down 2.9% year-on-year, with net profit at $3.794 billion, down 46.5%. Net profit nearly halved. Notably, Tesla's revenue growth has significantly slowed, from 70.67% in 2021 to 51.35% in 2022, 18.8% in 2023, and 0.95% in 2024, before declining 2.9% in 2025. Net profit growth followed a similar trend, surging 665.46% in 2021 and 127.5% in 2022, but dropping to 19.44% in 2023 due to price wars, then plummeting 52.72% in 2024, with net profit falling from $15 billion in 2023 to $3.794 billion.

BYD's net profit caught up to Tesla in 2024, with BYD reporting $23.3 billion in net profit for the first three quarters of 2025, matching Tesla's. Based on the average of the first three quarters, BYD's net profit will fully surpass Tesla's for the first time.

Notably, Tesla's energy and other business revenues hit record highs, indicating initial success in its business model transformation. Consequently, the company's overall gross margin closed at 20.12% in Q4, up 3.86% year-on-year and 2.13% quarter-on-quarter. This may explain Musk's calm demeanor despite the dismal financial performance.

While net profit plummeted 46.5%, posing significant challenges, the capital market remained forgiving and composed, with investors seemingly understanding Tesla's transitional phase.

3

Why Is Musk Following China's Lead?

Musk is renowned for his genius-level instincts. Amid the automotive industry's intensifying AI wave, Musk has keenly sensed what will define Tesla's future. While Tesla once propelled him to global billionaire status, it will not be his future focus. His explicit statements during earnings calls indicate his top priority in 2026 is no longer selling cars.

Musk's remarks reaffirm Tesla's new business core: providing transportation services has replaced 'selling cars.' He disclosed plans to mass-produce the autonomous Robotaxi CyberCab in April this year and launch an Airbnb-like platform allowing millions of owners to earn money by adding their vehicles to autonomous fleets. Musk's statements directly updated the company's mission, placing 'extreme prosperity' at the forefront, aiming for a 'high-income future for all' through AI and robotics. Notably, the trend Musk is targeting aligns precisely with China's hottest tech sectors.

In order to mitigate supply chain risks, Musk stated that he plans to establish a 'mega wafer fab' encompassing logic chips, memory chips, and packaging processes. He also officially announced plans to manufacture chips in-house. As is widely known, manufacturing chips in-house is a significant financial undertaking, and Tesla's net profit may not fare well in the coming years. However, since Musk has decided to pivot, Tesla is no longer the same company it once was. Now, Musk has placed a multitude of artificial intelligence missions on Tesla's shoulders.

The mass production of Robotaxi and Optimus robots represents the first step in Musk's plan. Tesla is set to release the third-generation version of Optimus in the first quarter of this year, which will also be the first design scheme geared towards mass production. Preparations for the first production line are underway, with a high probability of utilizing the production lines of the two discontinued Tesla models. Production is scheduled to commence before the end of this year, with an ultimate planned production capacity of 1 million robots annually.

Musk views China's artificial intelligence (AI) technology as a formidable rival. "So far, Tesla's most significant competitor in the realm of humanoid robots hails from China. China stands out for its prowess in scaling up manufacturing processes and adeptly integrating AI technology, consistently making strides forward. Consequently, it unquestionably emerges as Tesla's strongest contender. We do not perceive any substantial competitors from outside China; going head-to-head with China will undoubtedly be a formidable challenge. No one should underestimate China; it is a highly promising and superior adversary," Musk remarked.

Behind the Chinese AI that Musk takes seriously, Chinese companies have captured nearly 80% of the global market share in humanoid robots. Tesla's Optimus is projected to ship only around 150 units in 2025, representing less than 3% of the market. Furthermore, China boasts a comprehensive supply chain, rapid iteration capabilities, and ultimate cost efficiency (a term highlighting exceptional cost-effectiveness), enabling swift and large-scale mass production. Electricity is crucial for fueling computing power growth. By 2025, China's electricity supply is expected to be 2.4 times that of the United States, with projections indicating that by 2026, China's electricity generation will reach three times that of the US, providing ample support for extensive AI operations. China's computing power is set to lead the world. Musk also stated explicitly in a podcast, "China will spearhead the world in AI computing power. The key advantage lies in its electricity supply capabilities. China will generate more electricity than any other nation and may also possess a greater number of chips... Based on current trends, China will far outpace the rest of the world in AI computing."

BYD, XPeng, and Li Auto are all competitors that Musk cannot afford to overlook. Recently, He Xiaopeng extensively discussed robot gait control at a product launch, while Li Xiang is secretly developing the "brain" for embodied intelligence. Their market capitalizations have nearly halved compared to their peak values, and their automotive businesses can no longer sustain high market valuations. However, the field of AI robots holds immense promise.

Today, Musk has eclipsed his dream of building cars with an even grander vision. Musk has consistently maintained that Tesla has no alternative path, but the decelerating Tesla is overly reliant on Robotaxi and humanoid robots, which are currently uncharted territories and have not undergone any commercial validation. Will this gradually erode market patience and undermine investor confidence?

As a dream chaser, Musk may always be on the journey, relentlessly pursuing his visions.

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