We can no longer view Elon Musk and his business empire through old lenses.
Imagine: when the last Tesla Model S rolls off the production line at the Fremont factory in California, the facility will be retooled to churn out millions of Optimus robots. Imagine Musk's SpaceX and its fully-owned subsidiary xAI taking part in classified Pentagon projects, developing voice-controlled, autonomous drone swarms…
That moment could mark both the end of an era for Tesla and a new milestone in human industrial history.
On January 28, during Tesla's Q4 earnings call, CEO Elon Musk announced that production of the Model S and Model X would officially end by the end of the second quarter this year, freeing up capacity for Optimus robot manufacturing.
In Musk's view, Optimus and the Cybercab autonomous taxi are Tesla's core future growth drivers, in line with his ambitions for SpaceX and Starlink. Tesla serves as a cash cow and funding base, providing stable financial support for Musk's other ventures.
However, as Musk's ambitions grow, China must stay vigilant and prepared. This is no longer just a commercial partnership-it has become a key variable in major-power competition.
Recently, new reports showed that Musk said SpaceX has adjusted its deep-space exploration plans, delaying its Mars mission originally scheduled for this year to prioritize support for NASA's long-running lunar exploration program…
Balancing competition and cooperation requires precise judgment. As is well known, satellites, embodied intelligent robots and similar technologies have dual civilian and military applications.
01
Over the past year, Musk has aggressively pushed Tesla to make a dramatic strategic shift, even updating the company's mission to "creating amazing abundance." Clearly, the shrewd businessman sees that the electric vehicle business is approaching its growth limit.
With market saturation and rising competition, the EV market has grown increasingly cutthroat, squeezing profit margins.
In 2025, Tesla delivered 1.6361 million electric vehicles globally, down 8.56% year-on-year, marking the second consecutive year of decline.
Combined annual sales of its former flagship models-the Model S, Model X and Cybertruck-totaled only 50,900 units, accounting for just 3.11% of overall sales, far below expectations held by Musk and Tesla executives.
Although the volume-leading Model 3 and Model Y remained top sellers in multiple markets, they faced intense competition from Chinese brands, with annual sales falling 6.97% year-on-year. China will also soon ban the hidden door handles that Tesla has long prided itself on.
In contrast, humanoid robots and commercial aerospace boast enormous market potential, becoming major catalysts for Tesla's pivot.
02
Tesla plans around $20 billion in capital expenditure in 2026, double its average over the past three years, with most funds directed toward AI projects and robot development.
Musk has set an ambitious target of producing 1 million robots per year. In his eyes, Tesla is transforming from a car company into a "physical artificial intelligence company."
Yet this strategic shift has triggered mixed reactions in capital markets.
Morgan Stanley downgraded Tesla to "neutral," arguing its valuation is stretched, with optimistic expectations for AI and robotics already priced in, while profit growth faces pressure.
03
As Morgan Stanley noted, Tesla delivered its most concerning financial results in nearly a decade in 2025.
Tesla's full-year revenue reached $94.827 billion, down 2.83% year-on-year-the first annual revenue decline in the company's history.
More worrying is the collapse in profitability. In Q4 2025, Tesla's net income attributable to shareholders was $840 million, plummeting 60.47% year-on-year. Full-year net profit was $3.794 billion, down 46.79%.
For its automotive business, annual revenue was $69.526 billion, down 9.79% year-on-year, with a gross margin of 17.8%. By comparison, its energy business generated $12.771 billion, up 26.62%; services and other revenue hit $12.53 billion, up 18.95%-yet neither could offset weakness in its core business.
In response, Wells Fargo directly downgraded Tesla to "underweight," citing a deteriorating core auto business, slower-than-expected commercialization of Robotaxis and robots, and a lack of catalysts to drive share price gains.
On the day after the earnings release, Tesla's stock fell 3.45% to $416.56, down 16.49% from its all-time high of $498.83 set on December 22 last year.
Little wonder Musk is rushing to take SpaceX public and accelerate Tesla's transformation. Shifts in the Chinese market have undoubtedly played a significant role in these decisions.
04
Looking back at Tesla's development in China, there is no denying that its "catfish effect" once energized China's new energy vehicle (NEV) industry chain, pushing Tesla's localization rate of parts to over 95% and nurturing a complete supply chain ecosystem including CATL (Contemporary Amperex Technology Co., Limited), Top Group, and Zhejiang Sanhua Intelligent Controls Co., Ltd.
At the same time, Tesla's product-defining capabilities, direct-sales model, OTA upgrade philosophy, and foray into energy storage have profoundly influenced China's new automakers.
The product logic, user operations, and even launch event styles of listed Chinese EV makers such as NIO, Li Auto, and XPeng all bear the imprint of Tesla.
Yet as Chinese automakers have collectively achieved the 0-to-1 breakthrough in electrification transformation, Musk has had to face a harsh reality: in China, the world's largest NEV market, Tesla is no longer the leader but merely one competitor among many.
More importantly, drastic policy shifts toward electric vehicles across regions have also roiled his capital pool.
For AI, robotics, autonomous driving, Falcon rockets, and commercial satellites all demand massive capital investment. As Tesla-once a stable source of liquidity-grows unstable, Musk must paint a new vision for the company.
05
It is under this new vision that Tesla's identity in China has grown increasingly complex.
Recently, Musk has been planning to merge Tesla, SpaceX, and AI startup xAI to fuel his expansion ambitions in AI and aerospace.
As mentioned earlier, xAI's website shows the company has launched a large-scale hiring spree, targeting engineers based in Washington or the West Coast with active "Secret" or "Top Secret" U.S. security clearances to collaborate with federal contractors.
In a job posting, xAI said it is seeking software engineers with experience working "on AI, software, or data projects with government agencies, the Department of Defense, or federal contractors," adding that the hiring process would be completed within a week.
For China, the gradual integration of the "Musk ecosystem" has elevated the competitive-cooperative relationship from the commercial level to the dimension of national security.
The U.S. military and NASA frequently loom behind Musk's space initiatives.
It is less that Musk is building his own business empire and more that he is forging a "space force" for the United States. What's more, his tangled relationship with Donald Trump further complicates the situation.
On one hand, he rakes in huge profits by selling cars in China; on the other, Starlink satellites threaten Chinese spacecraft in orbit… When these connections are pieced together, many things begin to make sense.
06
Late last year, China's representative at a UN Security Council meeting pointed out that Starlink satellites had dangerously approached China's space station twice, forcing emergency evasive maneuvers and severely endangering the safety of Chinese astronauts.
In addition, "certain countries" have extensively used commercial aerospace entities to provide military reconnaissance, battlefield communications, and other services, even directly intervening in armed conflicts in other countries, blurring the line between military and civilian use in space and creating accountability challenges. The unregulated expansion of commercial satellite constellations has also posed significant space security risks.
Currently, Starlink has approximately 9,300 satellites in orbit, accounting for a large share of the world's active satellites. In December 2025, an anomalous Starlink satellite lost contact and generated massive debris, posing a severe threat to other spacecraft.
07
Even more alarming is that SpaceX has recently filed an application to launch 1 million satellites, describing the project as "the first step toward a Kardashev Type II civilization."
Setting aside the funding challenges of such a launch scale, is there really such enormous demand for Starlink? Or is it purely a grab for limited orbital resources?
Coincidentally, on February 5, Tesla's official AI account posted that Tesla's humanoid robots would be able to independently build civilizations on any habitable planet. Musk also stated that SpaceX plans to construct a "self-expanding" city on the Moon within 10 years.
Rather than excitement, many may sense the echoes of the Cold War-era space race in these pronouncements.
08
To meet these challenges, China-widely recognized as the world's second-largest aerospace power after the U.S.-is accelerating the construction of a "Great Wall" with systemic capabilities.
At the national level, by the end of 2025, China had applied to the International Telecommunication Union (ITU) for frequency and orbital resources for over 203,000 satellites. Additionally, the 15th Five-Year Plan has incorporated commercial aerospace into top-level design for the first time, explicitly calling for accelerated development of frontier sectors such as low-altitude economy and embodied intelligence.
At the corporate level, Chinese companies are accelerating their strategic positioning in response to Tesla's transformation and challenges. Beyond the Six Little Dragons of Hangzhou, other Chinese tech firms-including listed automakers such as XPeng, Geely, GAC, and BYD-are making multi-dimensional investments in forward-looking fields.
While Tesla's factories prepare to produce Optimus robots, the Shanghai Gigafactory continues to ship Model Y and Model 3 vehicles to global markets.
At XPeng's Zhaoqing plant, next-generation smart vehicles and humanoid robots are being developed in parallel; at Geely's satellite superfactory in Taizhou, Zhejiang, the assembly line produces 500 satellites per year.
As Musk gazes toward a future of Mars and robots, Li Shufu, He Xiaopeng, and others are also envisioning a world of flying cars and embodied intelligence.
The commercial competition and security rivalry between the world's two largest economies are now unfolding on multiple fronts simultaneously.
