Tesla confirmed that its annual revenues fell for the first time in the company’s history last year, as the firm announced plans to pivot towards humanoid robots and possibly build its own semiconductor factories during an earnings call on Wednesday.
The US-based company reported total revenues of US$94.8 billion for 2025, down by 3 per cent compared with the previous year. But revenues and gross profits beat analysts’ estimates in the final quarter of last year, coming in at US$24.9 billion and US$5 billion, respectively.
Tesla’s stock price surged in after-hours trading following the announcements.
The firm’s automotive production declined 7 per cent and total deliveries fell 9 per cent in 2025 from a year earlier, according to the company’s financial statement, as Tesla struggles to fend off fierce competition from Chinese electric vehicle makers such as BYD in the global market.
Tesla CEO Elon Musk’s political activities, especially his previous affiliation with US President Donald Trump, may also have had an impact on sales, especially in the European market.
Musk announced that the company would start winding down production of its Model S and Model X electric cars from next quarter and repurpose its California factory to manufacture Optimus, Tesla’s flagship humanoid robot.
The long-term goal was to produce 1 million robots per year at the Fremont facility, Musk said, adding that Tesla would unveil the Optimus 3 robot in the next quarter.
The growing focus on humanoid robots means the company now has an “existential” need to shore up its supplies of artificial intelligence (AI) chips, as Optimus cannot function without them, according to Musk.
Tesla was considering building a “Terafab” facility to manufacture its own chips, the CEO said, adding that he saw chips as the main limiting factor for the company’s growth in the next three to four years.
The urgency comes from a potential production bottleneck, as Musk said that even in a best-case scenario, the output of key chip suppliers such as Samsung, Micron Technology and Taiwan Semiconductor Manufacturing Company would not be able to keep up with Tesla’s needs.
More importantly, Musk believes it is necessary to build such a facility in the United States to hedge against potential geopolitical risks. “We need to have more fab capacity in the US, just in case chips stop arriving for any reason,” he said.
The comment may have been a coded reference to a recent dispute between the Netherlands and China over control of the chip firm Nexperia, which disrupted the chip supplies of a string of European carmakers.
Musk admitted that Tesla would face competition from Chinese firms in the humanoid robot space – with China likely to be the toughest and only rival for the company – but he stressed that Optimus 3 would be better than any robots under development in China of which the company was aware.
China accounted for more than 80 per cent of humanoid robot installations worldwide in 2025, according to a report by Counterpoint Research published earlier this month. -- SOUTH CHINA MORNING POST
