Tesla plans to more than double its capital investment to over $20 billion this year in a move that includes expanding its factories and investing in some yet-to-be-proven technology.
"We're making big investments for an epic future," Tesla co-founder and Chief Executive Officer Elon Musk told investors during the company's fourth-quarter 2025 earnings call.
The funds will go toward producing cars and batteries across the nation; robots in California's Silicon Valley; and other "major investments" to scale up its Robotaxi fleet, AI chips, and energy generation and storage business.
Musk said Tesla will convert some production lines that make its older Model S and Model X electric vehicles at its California factory to manufacture its Optimus humanoid robots, a move he said would involve adding workers at the plant and ramping up production overall.
The factory is in Fremont, the Bay Area's fourth-largest city and a municipality that has emerged as a national center for factories making the hardware that underpins artificial intelligence and other rapidly expanding 21st-century technologies.
Tesla's planned expenditures mark a major increase from the nearly $9 billion the company spent in 2025 as it evolves from an electric vehicle maker into a technology company fueled by AI innovations.
Industrial space takes center stage for the company as part of this growth, namely manufacturing and research hubs in Texas, California and Nevada. It will produce the Tesla Semi in Nevada and the Cybercab in Austin, Texas, according to Tesla's investor presentation.
Tesla's decision to invest in its real estate comes at a time when the company's profits slid 46% last year and it lost its title as the world's largest EV maker to China's BYD.
A manufacturing pivot
Fremont has been a central hub for Tesla's EV manufacturing since 2010 — when the company repurposed the former General Motors plant that dated back to the early 1960s — and has remained a key facility for the company even after Musk moved its headquarters from California to Texas in 2021. The company is Fremont's largest employer with around 30,000 people.
The company is shifting and growing its footprint in the area to manufacture its cutting-edge robotics innovations.
The firm plans to phase out production of the Model S and Model X vehicles in favor of building out its Optimus program at its Fremont factory at 45500 Fremont Blvd.
"It is time to bring the S and X programs to an end and shift to an autonomous future," Musk said on the call.
The Model S, which hit the market in 2012, is widely credited with helping make electric vehicles mainstream. The Model X followed as Tesla's second major vehicle line.
"As we increase vehicle autonomy and begin to produce Optimus robots at scale, we are making very big investments," Musk said.
New deals in California
Tesla has quietly leased a sprawling research and development facility in Silicon Valley near its flagship factory in Fremont as it recasts itself as a robotics and AI firm.
The company signed a deal to fill the entirety of a 108,000-square-foot R&D facility just a stone's throw from its Freemont factory. It's not clear whether the firm will use the properties for robotics or cars, or both, but AI innovation is likely to play a role as the technology remains embedded in each of the firm's business lines.
This quarter, the company plans to unveil the Gen 3 version of Optimus, its first mass production design of the humanoid robot designed to observe and duplicate human tasks. Currently, these robots are able to perform basic tasks within Tesla's industrial facilities, executives said during the recent earnings call.
Tesla aims to begin production by the end of this year on Optimus Gen 3 with a goal of building 1 million robots per year in Fremont.
Fremont city officials said in reports that the area is still the largest vehicle manufacturing area for Tesla where it builds its most popular cars: the Model 3 and Y. Texas is home to production of the Cybertruck and planned Cybercab.
AI expansion
Tesla's latest deal in Fremont encompasses the entire building at 45401 Research Ave. in the city's Warm Springs "innovation district," which is home to an array of advanced manufacturing and research operations for companies such as Zoox, Seagate and Western Digital as well as Tesla, which remains the city's biggest employer.
Tesla is expected to move into the building in April.
The new lease has "underscored AI's impact on the R&D market, driving growth for emergent and mature tech companies, and fueling demand for facilities that support specialized manufacturing," Colliers wrote in a report.
Musk has sought recently to frame Tesla as an AI and robotics company rather than merely a carmaker. Experts have noted that developing state-of-the-art software-first vehicles increasingly requires proximity to Silicon Valley's AI, robotics and hardware ecosystem.
Despite having relocated from Palo Alto, California, to Austin, Texas, in 2021, Tesla views California as a "critical nerve center for the high-level R&D required to maintain its dominance in the increasingly competitive electric vehicle landscape," Tesery, an independent website and blog that sells Tesla accessories and follows happenings at the electric car company, said in a report.
Fremont Economic Development Director Donovan Lazaro said the city has seen a surge in demand for space from companies that manufacture servers and other hardware that have snapped up a mix of strategically located logistics, flex and specialized facilities, even as the Bay Area’s office market is still clawing its way back from the ravages of the COVID-19 pandemic.
For example, built in Fremont less than a year ago, the 400,000-square-foot Fremont Technology Center reached full occupancy last summer, leasing space to MiTAC Information Systems Corp., the U.S. subsidiary of Taiwan-based MiTAC Holdings, as well as a firm involved with electric vehicle technology.
"We’ve added millions of square feet of space, and advanced manufacturers are gobbling it up as fast as it can be built,” Lazaro told CoStar News. “If you’ve used a large language model or shared something on social media, there’s a good chance that the server that enabled it was made in Fremont.”