Earnings Paint a Flat EV Story but an Aggressive AI Future
Tesla’s latest earnings underline a company in transition. Revenue came in at USD 22.39 billion (approx. RM106.1 billion) with adjusted earnings per share of USD 0.41 (approx. RM1.94), essentially in line with Wall Street expectations. Deliveries allowed Tesla to narrowly retake the quarterly global EV crown from BYD, yet the growth narrative around cars is no longer the main headline. Instead, Elon Musk told investors to expect a “very significant increase in capital expenditures,” flagging a sharp ramp in spending on battery and powertrain technology, AI software and training, chip design, and manufacturing capacity. Capital expenditure has already jumped 67% year‑on‑year to USD 2.49 billion (approx. RM11.8 billion), with guidance implying much heavier investment ahead. For shareholders, the message is clear: short‑term margins and free cash flow will be under pressure as Tesla pours cash into what Musk frames as the next chapter—robotaxis and humanoid robots.
Killing Model S and X to Make Space for Optimus
The clearest signal of Tesla’s new priorities is its decision to end production of the Model S and Model X. The Fremont lines that once built Tesla’s flagship premium vehicles are being repurposed for the next‑generation Optimus humanoid robot. Commentators note that Tesla has “stopped manufacturing its Model S car and its Model X car” specifically so it can “start to manufacture other things, including robots, the Optimus robot,” which Elon Musk has described as the “biggest product release ever, not just by Tesla, but ever in the world.” This is not just a model refresh; it is a strategic reallocation of scarce factory space, engineering talent and capital away from legacy high‑margin cars toward a completely new hardware category. It also raises execution risk: Tesla is voluntarily shrinking part of its profitable car portfolio to chase a still‑unproven robotics market.
From EV Maker to ‘Physical AI Stalwart’
Musk now frames Tesla less as an automaker and more as a “physical AI” company, with Optimus humanoid robots and autonomous robotaxis at the core. The company is investing tens of billions into in‑house AI chips, data centres, and advanced manufacturing infrastructure to support full self‑driving, robotaxi fleets and humanoid robots rather than just vehicles. Analyst Dan Ives argues this is Tesla “morphing into a physical AI stalwart” and says investors should not “sweat the CapEx,” maintaining an Outperform rating and a Street‑high price target on the stock. The bullish case is that Tesla’s AI software, custom chips and robotics expertise could eventually command software‑like margins, dwarfing profits from car manufacturing. The bear case is that the company’s valuation already anticipates such outcomes, while current margins face pressure from heavy investment, softer EV demand in some markets and intensifying competition from Chinese rivals.
Optimus V3, Secrecy, and the Embodied AI Arms Race
Optimus is Tesla’s entry into the embodied AI race—robots that can sense, reason and act in the physical world. Musk told investors that competitors in humanoid robotics are doing “frame‑by‑frame analysis” and copying Tesla’s work, so the company plans to unveil the Optimus V3 robot closer to production, targeted around July–August. The Optimus production line, rebuilt from the former Model S and X line, is “a completely new product with a completely new production line.” In the near term, Tesla positions Optimus for repetitive and dangerous tasks in factories and warehouses, where humanoid form factors can plug into existing human‑designed workflows without re‑architecting entire plants. Longer term, the ambition is domestic and service work in homes, retail and healthcare. If Tesla can mass‑produce humanoid robots at scale, it could set de facto standards for hardware, safety protocols and AI control stacks in physical AI.
Risks, Upside and Why Asia Should Pay Attention
Tesla’s physical AI strategy is high risk, high reward. Redirecting capital and factory capacity from vehicles to humanoid robot production and robotaxis could dilute focus on its core EV business just as competitors gain ground. Some investors already worry about slowing autonomous driving progress and weaker sales in key markets like California. Yet if Optimus becomes a reliable, affordable industrial worker, the profit pool could exceed that of cars, validating today’s aggressive spending. For Malaysia and other Asian economies, this shift matters on several fronts: future manufacturing and logistics facilities may rely heavily on Tesla‑style humanoid robots, reshaping factory employment and skills requirements; regional suppliers serving Tesla’s EV ecosystem may find new opportunities in robotics components; and governments designing EV and AI policies will increasingly need to think about physical AI infrastructure—charging, connectivity and regulation—not just vehicles.