Elon Musk on Tesla's Robot Army & Business Rebound

Tesla Navigates Shifting Priorities Amidst Record Sales

Despite a strong sales quarter, offering a degree of relief after a challenging start to 2025, Tesla’s CEO, Elon Musk, remains heavily invested in the development of advanced artificial intelligence and autonomous driving technologies. These endeavors are crucial for realizing the full potential of a proposed $1 trillion compensation package for Musk.

The Divergence of Automotive and AI Strategies

A clear distinction is emerging between Tesla’s established automotive business and the AI-focused future envisioned by Musk. Successfully bridging this gap is paramount to the company’s long-term success.

Third Quarter Performance: Records and Reduced Profits

Tesla achieved record vehicle deliveries in the third quarter of 2025, largely driven by increased demand in the United States capitalizing on the expiring federal EV tax credit. However, this record performance did not translate into increased profitability.

Third-quarter profits were 37% lower compared to the same period last year, despite shipping 497,099 vehicles and generating $21.2 billion in automotive revenue – the company’s highest revenue in over a year.

Financial Details and Increased Expenses

Tesla reported a profit of $1.4 billion for the third quarter, a modest increase of $200 million from the previous quarter. This followed a difficult start to the year, marked by declining sales partially attributed to Musk’s external engagements.

A significant 50% increase in operating expenses compared to the third quarter of the previous year contributed to the reduced profits. This rise was fueled by investments in AI and research & development, alongside approximately $240 million in restructuring charges.

Impact of Tariffs and Strategic Investments

Tariffs also negatively impacted profits during the quarter, with Musk reportedly allocating around $300 million to support a presidential candidate whose policies have adversely affected the company’s business. Tesla’s CFO, Vaibhav Taneja, quantified the tariff impact at approximately $400 million.

Focus on Full Self-Driving and Robotaxi

“We are at a critical turning point for Tesla, as we integrate AI into real-world applications,” Musk stated during an earnings call. He emphasized the company’s focus on scaling Full Self-Driving and Robotaxi capabilities, aiming to fundamentally reshape the transportation landscape.

Looking Ahead: Q4 and Long-Term Growth

The final quarter of the year presents further challenges, requiring another record-breaking performance to match the vehicle shipment numbers of 2024 or 2023. The introduction of more affordable Model 3 and Model Y variants may provide some assistance.

However, even with these improvements, Tesla is currently falling short of its previously projected 50% year-over-year growth rate.

Beyond Cars: AI, Robotics, and the Future of Tesla

Musk has consistently encouraged stakeholders to view Tesla as more than just a car manufacturer. He envisions a future where a network of self-driving vehicles rivals Uber, and where the humanoid robot, Optimus, becomes the best-selling product globally.

Optimus Development and Challenges

Updates on these initiatives were limited during the earnings call. Musk indicated that Tesla may begin production of the third iteration of Optimus in the first quarter of 2026. Initial production of Optimus has encountered obstacles, despite earlier projections of producing thousands of units by the end of this year.

“Developing Optimus for market release is a remarkably complex undertaking,” Musk acknowledged.

Vision for Optimus and Societal Impact

Musk reiterated his ambitious vision for Optimus, suggesting its potential to address global poverty and revolutionize healthcare. He specifically highlighted Optimus’s potential as a highly skilled surgeon.

Increased Investment in AI and Robotics

The intensified focus on AI, robotics, and autonomous vehicles, including the development of the two-seater “Cybercab,” will necessitate increased capital expenditures in 2026. Tesla is also actively investing in talent acquisition to remain competitive in the rapidly evolving AI landscape.

The $1 Trillion Compensation Package

These results coincide with Tesla’s proposal to award Musk $1 trillion in shares, a plan scheduled for a shareholder vote at the upcoming annual meeting. Both the company and Musk are actively campaigning for its approval.

Despite recommendations against the package from advisory groups like ISS and Glass Lewis, its passage is likely given prior shareholder support.

Musk’s Stance and Potential Departure

Musk has even threatened to leave Tesla if the compensation package is not approved, asserting that his primary concern is maintaining voting control rather than the financial gain.

“I am not comfortable developing a robot army only to be removed due to misguided recommendations from ISS and Glass Lewis, who lack understanding. They are, frankly, corporate terrorists,” Musk stated.

This report has been updated to include additional information from Tesla’s third-quarter conference call.