Tesla is to axe production of two electric vehicle (EV) models as part of a shift towards robotics after the company reported its first ever decline in annual revenue.
Chief executive Elon Musk told analysts on a conference call that the company would stop selling its older Model S and Model X vehicles and convert factory space to manufacture its Optimus robots instead.
Tesla revealed that investment would more than double this year to $20bn (£14.5bn), with $2bn of that sum going to his artificial intelligence division xAI.
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The spending seeks to make good on a series of promises by Mr Musk relating to Tesla's transition towards self-driving cars and robotics that have, so far, fallen short of targets.
Mr Musk's plans to build Cybercabs - robotaxis - have been hampered to date by a lack of capacity and regulatory clearances.
He has previously warned that a shortage of memory chips amid the wider rush for AI globally, risks hampering production as it ramps up later this year.
Tesla is looking to new revenue streams as its traditional EV space becomes ever more crowded, with China's BYD overtaking the company last year to become the world's biggest EV maker.
The US company's revenues and profits suffered in 2025 as core EV sales were battered by a backlash against Mr Musk for his cost-cutting role at the heart of the Trump administration and interventions in foreign elections.
The sales Tesla did make were on the back of steep discounts, reflecting not only the often violent boycott of Tesla by political opponents but also the fact that vehicles made by Tesla's competitors are cheaper.
A US tax incentive for electric vehicles was also ended by the Trump administration amid Mr Musk's on-off relationship with the president.
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Tesla shares were up by 2% in after-hours trading - building on cautious gains of last year that have been largely explained by the AI-driven turnaround plans promised by Mr Musk.
He is under pressure to meet a share price-based incentive plan, potentially worth up to $1trn over 10 years, but there are fears among some investors that his focus is spread too thin.
Mr Musk plans to take his rocket company SpaceX public, possibly in June.
(c) Sky News 2026: Tesla axes EV models in drive for robotics revenue
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