Will Optimus Mass Production and FSD Bring New Life to Tesla in 2026?

TradingKey - Mass production of the Optimus robot is viewed as Tesla (TSLA) the key to transitioning from an automaker to an AI and robotics giant. With the third generation (Gen3) set for release in 2026, its low cost (target of $20,000) and the technical advantage of repurposing FSD technology are expected to support Tesla's trillion-dollar market cap vision and resolve growth bottlenecks outside the automotive business, though it also faces significant challenges in technology and production execution.

Current Challenges Facing Tesla

Looking at recent quarters, the predicament facing Tesla has become increasingly grim. Affected by Elon Musk's continued political involvement in 2025, the removal of EV subsidies, and intensified competition from Chinese automakers, Tesla's core business remains sluggish, and its market share is being continuously squeezed.

According to its published financial reports, impacted by its EV business, Tesla's annual revenue fell by 3% year-over-year, marking the company's first-ever annual revenue decline.

In the short term, there are no signs of a reversal in the slump facing Tesla's EV business. Furthermore, as Tesla CEO Elon Musk announced the phased discontinuation of the Model S/X series next quarter, the EV business is likely to remain in a downturn for the coming quarters.

Although record energy storage deployments are seen by the market as a 'hard support' to hedge against the automotive downturn in the short term, from a long-term perspective, the energy storage business may be cyclical, and short-term support might find it difficult to alter Tesla's current predicament.

Tesla's Response Measures to Challenges

During the most recent earnings call, Tesla CEO Elon Musk announced the phased discontinuation of the Model S/X series next quarter, with production lines gradually shifting to Optimus manufacturing to address short-term bottlenecks in the automotive segment. This is also seen as the path for Tesla to launch a new growth engine.

Despite the plan being in its initial stages, the ultimate target of an annual production capacity of 1 million Optimus robots seems to have provided a lifeline for Tesla. Judging by the stock price, the market has clearly accepted Musk's 'selling a dream,' which has also allowed Tesla to briefly break out of its predicament.

Secondly, Tesla will begin providing limited unsupervised vehicle services in Austin in January 2026, with plans to expand coverage to multiple U.S. cities in the first half of 2026, including Dallas and Houston in Texas, Phoenix in Arizona, Miami, Orlando and Tampa in Florida, and Las Vegas in Nevada.

In addition, regarding FSD functionality, the company is phasing out the one-time purchase option starting this quarter, shifting primarily to monthly subscriptions. In the fourth quarter, active FSD subscribers grew 38% year-over-year to 1.1 million. This means that cash flow generated by FSD is no longer tied to Tesla's delivery volumes but instead represents a stable monthly inflow, which is significant for the company's cash flow stability.

Mass production of the Optimus robot is viewed as the key to Tesla's transition from an automaker to an AI and robotics giant. With the third generation (Gen3) set for release in 2026, its low cost (target of $20,000) and the technical advantage of repurposing FSD technology are expected to support Tesla's trillion-dollar market cap vision and resolve growth bottlenecks outside the automotive business.

However, as for its effectiveness, we must continue to monitor whether Tesla's upcoming financial reports can turn ideals into reality. But from the perspective of short-term stock performance, the market seems to have already bought into Tesla's Optimus robot and FSD functionality.