Tesla announces US$20bn robotics spend, axes Models X and S

Tesla plans to more than double capital spending to a record US$20bn during 2026, a sum which Chief Executive Elon Musk indicated will be overwhelmingly used to fund its future business lines including autonomous vehicles and humanoid robots instead of its core electric vehicle business. The announcement came during the 28 January earnings call, wherein Musk declared “this is going to be a very big capex year”; a necessity for “an epic future.” 

Elsewhere in the call, Chief Financial Officer Vaibhav Taneja said that most of the year’s spending will support production lines for the upcoming Cybercab autonomous vehicle, Tesla Semi truck, Optimus robots—all of which are scheduled to commence series production in 2026—as well as battery and lithium production facilities.

The pivot toward Optimus will come at a cost: Musk announced its Fremont plant would cease production of the Model S sedan and Model X SUV—the automaker’s original flagship premium series—and have its production lines repurposed for the humanoid robot. The vehicles, launched in 2012 and 2015 respectively, only accounted for an estimated 3-5% of 2025 deliveries and received minimal updates relative to their mass market counterparts, the Models Y and 3. 

The US$20bn commitment is well over double the US$8.5bn in capex spending of 2025, and far surpasses the previous record of US$11.3bn, set in 2024. Taneja indicated the company holds more than US$44bn in cash and investments to fund the spending, and signalled that 2026 likely represents the beginning, rather than conclusion, of increased capex. Tesla separately announced plans to invest approximately US$2bn into xAI—Musk’s AI startup, responsible for Grok—despite a November shareholder vote failing to approve any such investment.

With the major capital allocation, Musk is effectively putting Tesla’s money where his mouth is. For some time now, the chief executive has been urging investors not to view his company as an electric vehicle company, but instead an “AI and robotics” firm. However, its efforts to launch robotaxi services throughout the US have stalled repeatedly: a pilot service is currently live in Austin, despite Musk’s promises that the automaker would cover half of the US by end-2025.

Tesla also claims robotaxi operations in the San Francisco Bay Area under the same branding, although California regulations prevent it from operating truly autonomous vehicles as it lacks required permits. This has forced the service to instead use a ‘chauffeuring’ permit, and employ human drivers to monitor the system at all times. During the call, plans were announced to expand robotaxi operations to Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas during H1 2026, although time will tell if this pans out.

The deployment of its Cybercabs will likely face similar hurdles, given the lack of manual controls like a wheel and pedals. Last week, Musk acknowledged that initial production of the Cybercab will be at a limited scale, and that the ramp-up to higher volumes would be “agonisingly slow”.