Tesla’s annual profit fell to its lowest level since the pandemic, with net income plunging 46% to $3.8 billion, marking a second straight year of steep decline.

The electric vehicle maker also lost its title as the world’s largest EV producer to a Chinese rival.

The downturn comes despite the rollout of cheaper models and Elon Musk’s earlier pledge to refocus on Tesla after his involvement in U.S. politics.

Musk Shifts Focus to AI, Robots, and Robotaxis

Despite weakening car sales, investor confidence remains relatively strong, with Tesla’s stock up 9% over the past year.

Musk is urging shareholders to look beyond vehicles toward a future driven by artificial intelligence, including robotaxis and Optimus humanoid robots.

Tesla plans to stop producing its aging Model S and X in the second quarter, converting its Fremont factory to Optimus production, while more than doubling capital expenditure to $20 billion, largely for AI initiatives.

The company also disclosed a $2 billion investment in Musk’s xAI, raising concerns over potential conflicts of interest.

Mixed Results and Uncertain Road Ahead

Tesla’s fourth-quarter profit dropped 61% to $840 million, though adjusted earnings beat expectations.

Analysts point to aging models and brand damage linked to Musk’s politics, but positives emerged in Tesla’s energy storage business, where revenue rose25% to $3.8 billion, and gross margins improved to 20%.

Optimism around the robotaxi rollout persists, with plans to expand into multiple U.S. cities this year, though Musk’s history of missed deadlines tempers expectations.

Additional uncertainty surrounds Musk’s divided attention, particularly with a potential SpaceX IPO on the horizon.