Tesla’s annual profit fell to its lowest level since the pandemic ended as the company lost the title of the world’s biggest electric vehicle maker to a Chinese rival and said boycotts hurt sales, according to results released Wednesday. The EV maker, led by Elon Musk, reported net income dropped 46% last year to $3.8 billion and marked the second straight year of steep declines. Even with the earnings retreat, Tesla said investors have continued to back its strategy, and the stock was up about 9% over the past year.
The company’s fourth-quarter profit also declined sharply, dropping 61% to $840 million, or 24 cents per share, though Tesla said excluding one-time charges net income totaled 50 cents per share, compared with analysts’ forecasts of 45 cents. Musk used a conference call to press the case that Tesla should focus less on car sales and more on what he framed as an artificial intelligence future that includes robotaxis and robots for tasks ranging from operating vehicles without drivers to caregiving and watering plants.
During that call, Musk said Tesla would make changes aimed at shifting production away from older vehicles and toward robotics. Tesla said it had decided to close down production of two older car models, the S and X, in the second quarter. At the same time, it said it would convert a Fremont, California, factory to produce its Optimus robots.
Tesla also raised its spending expectations for the year. Officials said the company expects to more than double capital expenditures to $20 billion, tied in part to AI and other new projects. The company also disclosed it had recently invested $2 billion in xAI, an artificial intelligence company associated with Musk, and that disclosure raised potential conflicts of interest concerns given Musk’s stakes in both companies.
Musk’s AI roadmap has been accompanied by controversy, with the company facing criticism that xAI has courted controversy by echoing Musk’s views on race, gender and politics and by producing nonconsensual sexualized deepfake images, according to the report. Against that backdrop, Wall Street’s debate has centered on how much of Tesla’s future is likely to depend on robotaxis and robots before the core car business stabilizes.
In the earnings discussion, analysts pointed to both risks and signs of improvement. Telemetry analyst Sam Abuelsamid said the company’s situation reflects “aging product that is less and less competitive as other manufacturers come out with new models,” along with “the general brand destruction,” and he added that “Musk‘s involvement in politics has turned off customers.” Morningstar analyst Seth Goldstein, however, said Tesla’s ability to show improving profitability surprised him and described plans in the earnings report as encouraging.
Among the operational goals Goldstein cited were plans to roll out robotaxi service in Houston, Miami and five other cities in the first half of the year, and Tesla also said it would begin producing its two-seated Cybercab with no wheels or pedals within the same time frame. But other details in the report suggested the timeline has been slower than Musk has previously promised, including that regulators have not yet approved a partial self-driving software rollout in Europe that Musk said would happen in the first three months of last year.
The report also described how robotaxi safety practices have shifted. Tesla said it had promised robotaxi rides without anyone driving the car, but that until recently the vehicles had supervisors inside to grab controls if something went wrong. Tesla removed safety drivers in Austin, where it launched the service in June, while continuing to position robotaxis as the next major revenue driver.
On the most bullish side, analyst Dan Ives of Wedbush Securities predicted robotaxis would be in more than 30 cities by the end of the year, and he expected Tesla to capture 70% of the global market for self-driving cars in a decade. For Ives and others, that optimism is linked to Musk’s decision to refocus on Tesla after a period heading a U.S. government cost-cutting team, though the report noted it is not clear his attention will remain undivided in the new year given plans to potentially take SpaceX public, potentially as soon as June.
The company’s latest results put Tesla’s near-term profitability pressures into sharper focus while it ramps spending and repurposes production. At the same time, the move toward Optimus robots and expanded robotaxi plans sets up the next test of whether Tesla can convert its AI and automation ambitions into sustained growth, even as analysts continue to weigh product competitiveness, brand impact, and execution risk.