Tesla Accelerates Departure from the "Luxury Car Company" Path

Tesla has done something that is almost unimaginable in the traditional automotive industry.

On January 29, 2026, Tesla CEO Elon Musk announced that capital expenditures for 2026 would be "very large"; the Model S and Model X projects would be terminated.

In 2025, Tesla delivered approximately 1.6 million vehicles in total, with "Other Models," including Model S/X, accounting for only about 50,000 units, a marginal volume.

The Model S and Model X were once defining vehicles for Tesla's early "high-end electric vehicle" concept. In the context of traditional automakers, terminating these two projects is akin to Mercedes abandoning the S-Class or BMW discontinuing the 7 Series.

This also makes way for future humanoid robots.

Musk revealed that after transforming the Model S/X production line at Tesla's Fremont factory into a production line for Optimus, the output of its robots will reach 1 million units per year.

It is worth mentioning that Musk also announced that the new generation Roadster will make its debut in April.

This model, which was first announced in 2017 with a concept and reservation plan, has experienced nearly a decade of delays and silence, and is now being brought back to the center stage. This is more of a demonstration of extreme performance and technological symbolism, with the high price likely unrelated to the scale of product levels.

What this reflects is not the success or failure of a single product, but a clear business logic.

1. Retirement of flagship vehicles

When the Model S and Model X were born, electric vehicles were still positioned as "technical showcases."

Range, performance, intelligence, and design—all dimensions needed a benchmark product to break market biases.

In this sense, the role of S/X was more like an industry education tool.

Their task was not to achieve volume, but to prove that electric vehicles could be faster, smarter, and more futuristic than gasoline vehicles.

Ten years later, this task is no longer scarce.

In the high-end electric vehicle market, traditional luxury brands have completed their electrification transformation, new forces are building their own high-end narratives, and consumers' perception of "electric = low-end" has long been overturned.

When the demonstrative significance disappears, flagship vehicles need to be weighed in a more realistic position, that is, what position they occupy in the company's scale, cost structure, and technology flywheel.

From a manufacturing system perspective, S/X and Model 3/Y belong to two generations of product philosophy.

The former was born during a phase when Tesla was still focused on engineering breakthroughs, initially characterized by a complex platform, high customization, and a dispersed component system.

The latter was born for automation, cost reduction, and global replication, emphasizing the platform.

As a company's growth engine shifts from technological leadership to pursuing scale efficiency, complexity becomes a system cost.

The annual sales of S/X have already been included in the "Other" category along with Cybertruck and Semi in Tesla's disclosures, and compared to the single model scale of over a million units for Model Y, they no longer have priority in resource allocation From the perspective of capital efficiency, the same engineering team, production line resources, and supply chain bargaining power can either be directed towards low-volume, high-complexity flagship models or towards main platforms that can continuously scale and leverage data.

Tesla, accustomed to first principles thinking, clearly leans towards the latter.

1. De-branding, Efficiency Center, and Challenges

Traditional car manufacturers operate on a brand structure.

Low-end models are responsible for volume, mid-to-high-end models for profit, and flagship models for ceiling and premium capability. Even with limited sales, flagship cars remain the fulcrum of the entire pricing system.

Tesla operates more like an efficiency system. This includes manufacturing efficiency, supply chain integration capability, software and data scale, automation level, and potential future platform-based businesses.

In this structure, the value of a product is not only reflected in its gross margin but also in its ability to amplify the system's scale effects.

Model 3/Y serves as the core node for data entry, manufacturing platform, and global supply chain replication, while the limited scale of S/X contributes little to the flywheel's rotation speed.

In fact, this aspect is not surprising in Tesla's external narrative.

Autonomous driving, computing power platforms, energy systems, and humanoid robots have begun to replace "next-generation models" as the core variables of interest in the capital market.

Transitioning from "selling hardware" to "operating platforms and systems" is a typical story of industrial leapfrogging.

Within this framework, the symbolic significance of flagship luxury cars is merely superficial; they neither significantly contribute to data scale nor serve as scalable testing grounds for new technologies, but instead occupy engineering resources and production line space.

From an internal corporate perspective, this is not just a product line adjustment but also a redistribution of resources.

Abandoning the flagship product line does come at a cost.

On one hand, Tesla's brand anchor in the high-end market will be weakened.

When the pricing system is no longer supported by "ceiling models," the mid-range products' ability to withstand pressure in price wars will be more exposed than in traditional luxury car systems.

On the other hand, the pace of realizing future narratives is inherently uncertain.

Autonomous driving and robotics belong to long-cycle technology routes; if commercialization progress slows, the company's valuation logic will still revert to the reality of "selling cars as the main focus."

In this scenario, without a high-end product line as a profit buffer, cyclical fluctuations will more directly reflect in the financial statements.

From an industrial perspective, the exit of S/X is more like Tesla's reaffirmation of its positioning.

It has long ceased to attempt to become a car group with a complete brand gradient, but is resolutely betting on becoming an industrial technology company based on manufacturing, with AI and automation as its upper structure.

Success would mean a new species; failure would still require returning to the competitive logic of the automotive industry, re-accepting the tests of scale, cost, and cycles