Elon Musk is worried about taking control of Tesla’s “robot army” as the auto industry rebounds a bit

Tesla’s record sales quarter has offered the company a reprieve after a dire start until 2025. But CEO Elon Musk is focused on building an “army of robots” and fulfilling his years-unfulfilled promise of self-driving cars — tasks he needs to accomplish if he wants to unlock the full value of the trillion-dollar compensation package Tesla wants to give him.

The tension between Tesla’s existing car-based business and the AI-focused business that Musk is aiming for has never been more apparent.

Tesla delivered a record number of vehicles in the third quarter of 2025, thanks in large part to a rush of customers in the United States who took advantage of the expiring federal tax credit for electric vehicles. But this record quarter did not lead to increased profits. In fact, Tesla’s third-quarter profits were 37% lower than they were in the same quarter last year.

Tesla shipped 497,099 vehicles in the third quarter, generating $21.2 billion in vehicle revenue — the company’s best revenue figure in more than a year. But Tesla made a profit of just $1.4 billion, up just $200 million from the second quarter of this year, according to a shareholder letter issued Wednesday. The record quarter came after a poor start to the year for Tesla, which saw a sharp decline in sales in part due to Musk’s involvement with the Trump administration.

The company explained in the letter that a significant increase in operating expenses – 50% higher compared to the third quarter of last year – was one of the reasons. This increase in operating expenses is due to spending on artificial intelligence and other research and development projects, as well as “restructuring” charges of approximately $240 million. Tesla has not explained the reasoning behind these restructuring charges, but it is likely related to the recent decision to shut down the company’s six-year-old Dojo supercomputer project.

Tesla cited tariffs as another drag on profits last quarter, meaning Musk spent about $300 million to help elect a president who hurt the company’s business. Vaibhav Taneja, Tesla’s chief financial officer, said in a conference call on Wednesday that the tariffs amounted to about $400 million.

“We are at a critical inflection point for Tesla and our strategy moving forward as we bring AI into the real world,” Musk said on the call. Tesla is “beginning to expand, at scale, into full self-driving and robotaxis, fundamentally changing the nature of transportation,” he said.

All of this will put more pressure on the company’s final quarter.

Tesla really needs another record quarter (and then some) if it wants to simply match the number of cars it shipped in 2024 or 2023. And the company could get some help from new, slightly cheaper versions of its Model 3 and Model Y EVs. But even under this best-case scenario, Tesla is a long way from the 50% annual growth path it previously promised investors and shareholders.

But Musk has spent the past few years trying to get shareholders, investors, employees and everyone else to look beyond the company’s core business of making and selling cars. He is betting Tesla’s future on its ability to create a vast network of self-driving vehicles that he believes can challenge Uber. It is believed that the Optimus robot will become the best-selling product of all time.

Tesla provided little new information about those programs in a letter Wednesday. Musk said on the conference call that Tesla may start building the third version of Optimus in the first quarter of 2026. He had once promised to build thousands of robots by the end of this year, but as The Information reported, Tesla had problems in early production with Optimus.

“Bringing Optimus to market is a very difficult task, let’s be clear,” Musk said. “It’s not a walk in the park.”

But Musk continued with Tesla’s vague and non-specific claims about how much Optimus would change the world. “You can actually create a world where there is no poverty, where everyone has access to the best medical care,” he said. “Optimus would make a great surgeon.”

And the increasing focus on artificial intelligence, robotics, and self-driving cars (including the start of production of the two-seat “Cybercab”) will cost Tesla more next year. Taneja said capital expenditures will increase “significantly” in 2026 thanks to those projects. He also said Tesla had to increase employee-related spending to remain competitive in the ongoing AI talent war.

Tesla’s third-quarter results come amid the backdrop of the company’s proposal to hand over $1 trillion worth of stock to Musk. That plan is up for a vote at Tesla’s annual shareholder meeting in a few weeks. The company — and Musk — are campaigning hard. While advisory groups such as ISS and Glass Lewis recommend against approving the pay package, it is likely to pass given overwhelming support from shareholders for previous efforts.

But that did not stop Musk from threatening to withdraw from Tesla if the package was not approved.

On Wednesday’s call, he repeated his claim that he cares more about the voting control the compensation package would give him than the money.

“I don’t feel comfortable building an army of robots here and then getting kicked out because of some foolish recommendation from the ISS and Glass Lewis, who have no idea,” Musk said. “I mean, these guys are corporate terrorists.”

This story has been updated with new information from Tesla’s third-quarter conference call.