News
Automakers come to accept that the EV revolution has begun
The last several months have been busy in the electric vehicle revolution. Governments have been announcing their phase out plans for petrol vehicles and automakers have committed billions of dollars to electrification programs. At this point automakers are practically falling over each other racing to get out their announcements. How many electric vehicles they’re developing, how much they’re investing, are they going fully electrified, and when. Suddenly no one wants to be perceived as falling behind in this revolution. And why should they? Nokia and Blackberry can attest to what happens if you do.
In the past, established automakers have been very cautious with electrification, with many simply watching to see how the situation developed. Generally, their investments could be best described as vague or immaterial to their core business of making cars. That’s clearly changed – take a look at the timeline of announcements below.
Taken as a whole these announcements are really quite striking. Most recently it was GM and Ford that released their competing declarations of electrification. GM with twenty new fully electric vehicles by 2023 and Ford quickly following up to say they had a new dedicated team for fully electric vehicles, while reiterating their previously committed $4.5 billion in investments for 13 new electrified vehicle options. Ford followed up the next day to say they were also diverting one third of their investments from combustion vehicle development.
The month prior was filled with even more announcements, including tweets between Elon Musk and Mercedes about the size of the latter’s investments. Volkswagen, BMW, Mercedes, Jaguar, Honda, BYD, and Dyson all made significant announcements about their EV programs that month, but it was Volvo’s “fully electrified” announcement that first caught the media’s attention back in July. It was a clever, if somewhat misleading PR move, but it did set important targets for their company and the competition. The fact that Tesla started producing their mass market Model 3 was almost lost amongst all this news. That’s an exaggeration of course, but only a year ago many believed their plans were impossible.
Government announcements have been another important part of the narrative, with targets that provide direction and impetus to the industry. Based on some of the lobbying it hasn’t been entirely welcome, but that’s to be expected. Anytime an entire country is talking about completely phasing out your current business model, it’s going give an industry pause. In this case there were multiple, with China, the UK, France, India, and several others weighing in with their plans to phase out combustion vehicles.
Looking at these announcements together suggests that a new phase in the electric vehicle revolution has begun. The fundamentals behind this shift are what I will argue here. My proposition is that the combined macro-economic drivers of regulation, competition, and market growth are pushing EVs to the mainstream. Be forewarned, it’s a long post, but analyzing any of these factors in isolation loses the bigger picture. Electric vehicles are coming, of that there can be no doubt.
Regulation, competition, and market growth.
You’ll notice the analysis below centers around plug-in electric vehicles (PEVs). Today a little more than 60% of new EV sales are pure battery electric vehicles (BEVs) and the rest are plug-in hybrid electric vehicles (PHEVs). PHEV’s are a transitionary technology, which currently offer some benefits that will disappear as battery costs continue to fall and range continues to increase. Note that the analysis doesn’t include hybrids without plugs, they’re old news. Also note that in talking about vehicles and vehicle sales, these are always in reference to passenger vehicles (i.e. no freight trucks). Annual passenger vehicles sales data was taken from the International Organization of Motor Vehicle Manufacturers and electric sales information is from the International Energy Agency.
Regulation:
The 2015 Paris climate agreement requires country specific greenhouse gas reductions by 2030 or sooner. As part of the agreement countries must also submit annual reports on their progress. Transport is a key part of each country’s emissions and it’s one that has a solution at hand, hence the plans to phase out combustion vehicles. France and UK announced for bans by 2040, Scotland by 2032, Netherlands 2025, Norway 2025, and India and China in development. There’s some subtlety to each. Norway for example is leaning towards economic levers to achieve their goals in lieu of outright restrictions, while India has said they expect all vehicles to be electric by 2030 without regulation being necessary, though their official policy is expected later this year.
Personally I tend to agree. I expect we will all be buying electric vehicles long before 2040 largely due to economics, especially with carbon pricing. That said, all of the government announcements are important. They provide both the public and automakers a framework in which to operate, while the more aggressive targets are actually moving the industry forward.
California and nine east coast states have long mandated a portion of sales be zero emission vehicles (ZEVs), administered through a credit system. The system gives partial credit to plug-in electric vehicles (PEVs) and more credits to long range zero emission vehicles (ZEVs). It’s basically the reason automakers have produced ZEVs in the USA. In quite possibly the biggest announcement of the year China is now doing something similar. They’ve mandated a ‘new energy vehicle’ credit requirement of 10% of sales in 2019 and 12% in 2020. Since one EV can be responsible for multiple credits it means that less than 12% of all vehicles sold will be required to be zero emission vehicles. For example, if the requirement was met with vehicles like the BMW i3, it would mean 4.6% of all vehicle sales in China would be ZEV in 2020, about 1.4 million that year. For reference there are about 2.5 million PEVs on the planet right now.
China is also looking at establishing a date for complete phase out of petrol vehicles, which has caught California’s attention. California is not eager to lose their leadership position in electric vehicles and is now looking to increase their own targets and establish their own timeline for complete phase out. I believe the quote from their governor was “Why haven’t we done something already?”. It seems that an EV target race has begun and that means mandated growth for the EV market.
source: BMW
Market Growth:
This one has always been a bit of ‘chicken or the egg’ scenario. Historically demand for electric vehicles was low, which automakers referenced as the reason for their limited offerings. Others argued that there could be no demand when so few options were available, especially when those that did exist had such weird aesthetics (which was an effective way to prevent scavenging from more profitable combustion sales). Tesla flipped this around with their preorders of the Model 3 and showed everyone the latent demand to the tune of nearly 400,000 preorders. Other automakers took notice. BMW even started having widespread video presentations depicting the threat of Tesla to motivate their employees.
If you’ve only heard the rhetoric of how electric vehicles constitute a small fraction of the world’s annual sales, you might have missed something important. Exponential growth. Since 2012 growth of plug-in electric vehicles has been over 40% every year. Cumulatively that means 10x more PEVs will be sold in 2017 than 2012, as shown in the graph below.
Historical data from the IEA, 2017 estimate from EVvolumes.com
Don’t get me wrong, the existing market share is almost laughably low at 1.1% worldwide (2016 data from the IEA), but over the last three years sales have grown at an average 54.6% compound annual growth rate (CAGR).
To illustrate the effect of exponential growth consider the following example about bacteria in a jar. If the number of bacteria doubles every minute and after 1 hour the jar is full of bacteria, that means at 59 minutes the jar is half-full, at 58 minutes ¼ full, at 57 minutes 1/8 full, etc. At 54 minutes that jar is only 1.6% full and everyone is thinking that bacterial will never fill the jar. It’s simplistic and exaggerated but that’s where we are today, at 54 minutes.
The example shows the power of exponential growth but also the challenge in forecasting it. Over the long term, small changes in annual growth rates can have big impacts. Solar power projections were notoriously underestimated and each year forecasts had to be revised upwards. That’s not to disparage the forecasters, it’s incredibly difficult to do what they do and certainly some caution in forecasting is warranted. But it is worth considering that electric vehicles may be in a similar situation. For example, Bloomberg New Energy Finance (BNEF) posted an EV outlook report in 2016, estimating that annual sales in 2040 would be 35% of all vehicles sold and the total PEV fleet would be 410 million. This year they revised those projections up, to 54% and 600 million. That’s 200 million more EVs, on a starting estimate of 410 million, after one year of new data. Will the next years’ forecasts also be revised upwards?
Shorter timeframes are usually more accurate, BNEF’s numbers indicate they expect approximately 2.5 million PEVs to be sold in 2020. That seems reasonable, but it would mean that PEV sales growth slows to 35% annually for the next few years. With more models coming that have better features and lower costs, and with governments now pushing the market with more aggressive targets, it seems unlikely growth will slow. So as an experiment what happens if the 54.6% growth rate over the last three years continues, to 2020 and 2025?
The impact would be impressive. The graph indicates that over 4 million PEVs would be sold in 2020, for 5% of total vehicle sales. That jumps to 37 million PEVs sold in 2025, nearly 40% of the total vehicle sales predicted. Contrast that with BNEF numbers, of 3% of sales in 2020 and 8% in 2025. Personally I think 8% is a low estimate for 2025, it works out to a compound annual growth rate of approximately 25%. Interestingly UBS increased their 2025 PEV estimate upwards by 50% this year (from 2016) to 14% of total sales – showing that short-term projections can be just as uncertain.
Perhaps 54.6% isn’t feasible, although Tesla has nearly managed it with a 47% growth rate since 2013. They did this while building up their staff, infrastructure, technology, and procedures virtually from scratch all at the same time. It’s also worth considering the history of smartphones. Globally smartphone sales grew at a rate of 46.4% year over year for ten years from 2004 to 2014, growing from sales of 27 million a year to over a billion. It was even more dramatic in China, where smartphone users accounted for about 5% of mobile subscribers in 2010 but were 70% by 2015 (Statista). That’s in just 5 years.
Data from www.gartner.com
Granted smartphones are not cars. The average smartphone costs orders or magnitude less and is traded in every two years, while the average car is traded in every 6.5 years (in the USA). A smartphone apparently has an average total lifespan of 4.7 years and a car can last to ~200,000 miles, approximately 15 years of average driving.
But electric cars do offer something cell phones never have. A lower cost. Cell phones provide a wealth of new functionality in our lives, but generally at a premium. Today, electric cars already cost less to operate than combustion vehicles, by 2018 they are expected to reach cost parity on total cost of ownership (UBS report), and by 2025 Bloomberg expects them to cost less upfront than combustion vehicles. That’s battery only electric vehicles (BEVs). Perhaps the changeover is longer than it was for cellphones, but once BEVs have an upfront cost less than petrol, why would anyone buy anything else?
Competition:
More and more manufacturers are entering the electric vehicle field with legitimate programs and their EVs are getting excellent reviews. At the end of 2016 the Chevy Bolt came out and won the North American and Motor Trend car of the year awards. Be prepared to see future EVs dominate the awards. VW already has a new e-Golf, Nissan a new Leaf, BMW an updated i3, Hyundai released their Ionic, and Audi, Porsche, and Jaguar are all coming out with pure EV models in 2018. Then there are the massive “electrification” shifts from the likes of Mercedes, BWM, Volvo, Austin Martin, VW, Ford, GM, and others. All now committing to reshaping their companies and the industry by moving to electric vehicles. There’s also that company Tesla which started making their game changing Model 3. Suddenly there’s a lot of competition and if your company isn’t one of those competing…. what are you doing? Those automakers on the sidelines are starting to look obsolete and it’s a short road from obsolete to ‘out of business’. 
With automakers and governments committing to electrification of vehicles, we are going to see a significant ramp up in the electric vehicle market. More plug-in options are coming out, billions are being invested, and governments are seriously planning the end of combustion vehicles. It really is a paradigm shift. In large part we have Tesla to thank. If they hadn’t shown the world what was possible, who knows when this would have happened. Certainly the future would be a bit darker.
Tesla is bringing closure to its flagship Model S and Model X vehicles, which CEO Elon Musk said several years ago were only produced for “sentimental reasons.”
The Model S and Model X have been light contributors to Tesla’s delivery growth over the past few years, commonly contributing only a few percentage points toward the over 1.7 million cars the company has handed over to customers annually since 2022.
However, the Model S and Model X have remained in production because of their high-end performance and flagship status; they are truly two vehicles that are premium offerings and do not hold major weight toward Tesla’s future goals.
On Wednesday, during the Q4 2025 Earnings Call, Musk confirmed that Tesla would bring closure to the two models, ending their production and making way for the manufacturing efforts of the Optimus robot:
“It is time to bring the Model S and Model X programs to an end with an honorable discharge. It is time to bring the S/X programs to an end. It’s part of our overall shift to an autonomous future.”
Musk said the production lines that Tesla has for the Model S and Model X at the Fremont Factory in Northern California will be transitioned to Optimus production lines that will produce one million units per year.
Tesla Fremont Factory celebrates 15 years of electric vehicle production
Tesla will continue to service Model S and Model X vehicles, but it will officially stop deliveries of the cars in Q2, as inventory will be liquidated. When they’re gone, they’re gone.
BREAKING: Tesla will wind down Model S and Model X production next quarter, Elon Musk confirms.
“It is time to bring the Model S and Model X programs to an end with an honorable discharge.” pic.twitter.com/Czn7aQjJE1
— TESLARATI (@Teslarati) January 28, 2026
Tesla has been making moves to sunset the two vehicles for the better part of one year. Last July, it stopped taking any custom orders for vehicles in Europe, essentially pushing the idea that the program was coming to a close soon.
Musk said back in 2019:
“I mean, they’re very expensive, made in low volume. To be totally frank, we’re continuing to make them more for sentimental reasons than anything else. They’re really of minor importance to the future.”
That point is more relevant than ever as Tesla is ending the production of the cars to make way for Optimus, which will likely be Tesla’s biggest product in the coming years.
Musk added during the Earnings Call on Wednesday that he believes Optimus will be a major needle-mover of the United States’ GDP, as it will increase productivity and enable universal high income for humans.
Investor's Corner
LIVE BLOG: Tesla (TSLA) Q4 and FY 2025 earnings call
Tesla’s (NASDAQ:TSLA) earnings call follows the release of the company’s Q4 and full-year 2025 update letter.
Tesla’s (NASDAQ:TSLA) earnings call follows the release of the company’s Q4 and full-year 2025 update letter, which was published on Tesla’s Investor Relations website after markets closed on January 28, 2025.
The results cap a quarter in which Tesla produced more than 434,000 vehicles, delivered over 418,000 vehicles, and deployed 14.2 GWh of energy storage products. For the full year, Tesla produced 1.65 million vehicles and delivered 1.63 million, while total energy storage deployments reached 46.7 GWh.
Tesla’s Q4 and FY 2025 Results
According to Tesla’s Q4 and FY 2025 Update Letter, the company posted GAAP earnings per share of $0.24 and non-GAAP EPS of $0.50 in the fourth quarter. Total revenue for Q4 came in at $24.901 billion, while GAAP net income was reported at $840 million.
For full-year 2025, Tesla reported GAAP EPS of $1.08 and non-GAAP EPS of $1.66 per share. Total revenue reached $94.83 billion, including $69.53 billion from automotive operations and $12.78 billion from the company’s energy generation and storage business. GAAP net income for the year totaled $3.79 billion.
Earnings call updates
The following are live updates from Tesla’s Q4 and FY 2025 earnings call. I will be updating this article in real time, so please keep refreshing the page to view the latest updates on this story.
16:25 CT – Good day to everyone, and welcome to another Tesla earnings call live blog. There’s a lot to unpack from Tesla’s Q4 and FY 2025 update letter, so I’m pretty sure this earnings call will be quite interesting.
16:30 CT – The Q4 and FY 2025 earnings call officially starts. IR exec Travis Axelrod opens the call. Elon and other executives are present.
16:30 CT – Elon makes his opening statement and explains why Tesla changed its mission to “Amazing Abundance.” “With the continued growth of AI and robotics, I think we’re headed towards a future of universal high income,” Musk said, adding that along the way, Tesla will still be improving its products while keeping the environment safe and healthy.
16:34 CT – Elon noted that the first steps for this future are happening this year, thanks to Tesla’s autonomy and robotics programs, which will be launching and ramping this year. He also highlighted that Tesla will be making major investments this year, though the company will be very strategic when it comes to its funding. “I think it makes a ton of strategic sense,” Musk said.
16:36 CT – Elon also announces the end of the Model S and Model X programs “with an honorable discharge.” If you’re interested in buying a Model S or X, it’s best to do it now, Musk said. The Model S and Model X factory in Fremont will be replaced by an Optimus line. “It’s slightly sad, but it is time to bring the S and X program to an end. It’s part of our overall shift to an autonomous future,” Musk said.
16:38 CT – Elon discusses how Unsupervised FSD is now starting for the Robotaxi service. He noted that these Unsupervised Robotaxis don’t have any chase cars as of yesterday. He reiterated Tesla’s plans for owners to be able to add their own vehicles to the Robotaxi fleet. Autonomy target for the end of the year is about a quarter or half of the United States, Musk said.
16:41 CT – Elon noted that the Tesla Energy team is absolutely killing it. He also stated that Tesla expects its Energy business to continue growing, and that the “solar opportunity is underrated.”
16:43 CT –Elon also added that Tesla Optimus 3 will be unveiled in about three months, probably. The Model S and Model X line in Fremont will be a million-unit Optimus production line. Looks like Optimus is really coming out of the gate with large, meaningful volumes. “The normal S curve for manufacturing ramps is longer for Optimus,” Musk stated. “Long term, I think Optimus will have a significant impact on the US GDP.”
16:44 CT – Elon closes his opening statements with a sincere thanks to the Tesla team. He also noted that he feels fortunate to be able to work alongside such a talented workforce.
Elon ends his opening remarks with an optimistic prediction about the future.“The future is more exciting than you can imagine,” he concluded.
16:47 CT – Tesla CFO Vaibhav Taneja makes his opening remarks. He discusses several aspects of Tesla’s Q4 milestones. He noted that Tesla Energy achieved yet another gross profit record during the fourth quarter. There’s insane demand for the Megapack and Powerwall. Backlogs for these products are healthy this 2026. He also noted that Tesla ended 2025 with a bigger vehicle order backlog compared to recent years.
16:53 CT – Investor questions from Say begin. The first question is about Tesla’s expectations for the Robotaxi Network. Lars Moravy noted that it has the advantage of manufacturing and scale, and Tesla believes that the Robotaxi Network will significantly grow year over year. Elon highlighted that the Cybercab will be produced with no steering wheel or pedals. No fallback. Elon also noted that Tesla expects to produce more Cybercabs than all its other vehicles combined in the future.
16:51 CT – The next question is if Tesla still expects to launch new models, such as affordable cars. Lars Moravy noted that Tesla did release affordable variants last year, and Tesla is still pushing hard to lower its costs. That being said, Tesla is really pushing the Cybercab as its total addressable market is larger than consumer-owned cars. Lars also mentioned that Tesla will produce different vehicles for its Robotaxi services.
16:56 CT – Elon noted that eventually, Tesla will produce mostly autonomous cars. The exception would be the next-generation Roadster, which will be a true driver’s car.
17:03 CT – A question about Elon’s past comments about a potential next pickup truck was asked. Lars noted that the Cybertruck is still performing well in the electric pickup truck segment, though Tesla is known for flexibility. Elon added that Tesla will be transitioning the Cybertruck line to a fully autonomous vehicle line. He also stated that the Cybertruck is a useful vehicle. “An autonomous Cybertruck will be useful for that.”
17:10 CT – A question was asked about when FSD will be 100% Unsupervised. Elon noted that 100% Unsupervised FSD is already being used today, though only in the Austin Robotaxi program. Tesla is still being extremely careful with its rollout.
When asked about Tesla’s chip program, Elon noted that he feels pretty good about Tesla’s chip strategy. But in terms of selling Tesla’s chips outside Tesla, the company has to make sure it has enough chips for Optimus robots, data centers, and other programs first.
17:18 CT – Analyst questions begin. First up is Wolf Research. He asks about Tesla’s increasing Capex, specifically where the majority of it is going. The Tesla CFO noted that programs in six factories are going live this year, so that consumes Capex. The Optimus program also consumes a lot of resources. The growth of Tesla’s current capacity is also consuming a lot of resources. As for how these programs will be funded, the CFO pointed to Tesla’s massive war chest, as well as initiatives such as the Robotaxi Network.
17:21 CT – Morgan Stanley asks about Tesla’s xAI investment. The analyst asked about more information about how Tesla and xAI will work together. The CFO noted that this investment is part of Master Plan Part IV. Elon also mentioned some advantages for xAI’s technology for Tesla’s products, like Grok being used to manage a Robotaxi fleet or a group of Optimus robots.
17:24 CT – Barclays asks Elon about the constraints on memory. Does Tesla have any near term constraints for Tesla vehicles’ memory? Elon responded that the Tesla AI computer is already very compute and memory-efficient. The intelligence per gigabyte is important. Musk noted that Tesla is ahead of the industry by an order of magnitude or more.
17:29 CT – Cannacord asks about startups from China entering the humanoid market. What competitive advantage does Optimus have compared to these rivals? Elon stated that he believes China will be a key competitor in the humanoid robot market. China will be the toughest competitor for Tesla. That being said, Elon noted that Tesla believes Optimus will be ahead in real-world intelligence, electromechanical dexterity, and hand design.
News
Tesla announces massive investment into xAI
“On January 16, 2026, Tesla entered into an agreement to invest approximately $2 billion to acquire shares of Series E Preferred Stock of xAI as part of their recent publicly-disclosed financing round,” it said.
Tesla has announced a major development in its ventures outside of electric vehicles, as it confirmed today that it invested $2 billion into xAI on January 16.
The move is significant, as it marks the acquisition of shares of Series E Preferred Stock, executed on market terms alongside other investors. The company officially announced it in its Q4 2025 Shareholder Deck, which was released at market close on Wednesday.
The investment follows shareholder approval in 2025 for potential equity stakes in xAI and echoes SpaceX’s earlier $2 billion contribution to xAI’s $10 billion fundraising round.
Tesla said that, earlier this month, it entered an agreement to invest $2 billion to acquire shares of Series E Preferred Stock of xAI:
“Tesla’s investment was made on market terms consistent with those previously agreed to by other investors in the financing round. As set forth… pic.twitter.com/HgtrcHdB2U
— TESLARATI (@Teslarati) January 28, 2026
CEO Elon Musk, who is behind both companies, is now weaving what appears to be an even tighter ecosystem among his ventures, blending Tesla’s hardware prowess with xAI’s cutting-edge AI models, like Grok.
Tesla confirmed the investment in a statement in its Shareholder Deck:
“On January 16, 2026, Tesla entered into an agreement to invest approximately $2 billion to acquire shares of Series E Preferred Stock of xAI as part of their recent publicly-disclosed financing round. Tesla’s investment was made on market terms consistent with those previously agreed to by other investors in the financing round. As set forth in Master Plan Part IV, Tesla is building products and services that bring AI into the physical world. Meanwhile, xAI is developing leading digital AI products and services, such as its large language model (Grok).”
It continued:
“In that context, and as part of Tesla’s broader strategy under Master Plan Part IV, Tesla and xAI also entered into a framework agreement in connection with the investment. Among other things, the framework agreement builds upon the existing relationship between Tesla and xAI by providing a framework for evaluating potential AI collaborations between the companies. Together, the investment and the related framework agreement are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale. This investment is subject to customary regulatory conditions with the expectation to close in Q1’2026.”
The history of the partnership traces back to xAI’s founding in July 2023, as Musk launched the company as a counterweight to dominant AI players like OpenAI and Google.
xAI aimed to “understand the true nature of the universe” through unbiased, truth-seeking AI. Tesla, meanwhile, has long invested in AI for its Full Self-Driving (FSD) software and Optimus robots, training models on vast datasets from its vehicle fleet.
The investment holds profound significance for both companies.
For Tesla, it accelerates its Master Plan Part IV, which envisions AI-driven autonomy in vehicles and humanoid robots. xAI’s Grok could enhance Tesla’s real-world AI applications, from optimizing battery management to predictive maintenance, potentially giving Tesla an edge over its biggest rivals, like Waymo.
Investors, on the other hand, stand to gain from this symbiosis. Tesla Shareholders may see boosted stock value through AI innovations, with analysts projecting enhanced margins and significant future growth in robotics. xAI’s valuation could soar, attracting more capital.
Tesla brings closure to flagship ‘sentimental’ models, Musk confirms
LIVE BLOG: Tesla (TSLA) Q4 and FY 2025 earnings call
