In a bold assertion that challenges the current strategic trajectory of the world’s most valuable automaker, a prominent financial analyst has publicly criticized Tesla’s decision to wind down production of its flagship luxury vehicles. Gary Black, Managing Partner of The Future Fund and a long-time observer of Tesla (NASDAQ: TSLA), argues that the company is making a significant misstep by discontinuing the Model S and Model X. Instead, Black contends that the controversial Cybertruck is the vehicle that should face the chopping block, citing concerns over brand equity and profitability.
The debate comes at a pivotal moment for Tesla, as CEO Elon Musk pivots the company’s resources toward robotics and autonomous driving. With the Fremont Factory set to transition its legacy production lines to accommodate the Optimus Gen 3 robot, the automotive landscape is witnessing the end of the cars that defined the modern electric vehicle (EV) era. However, Black’s commentary highlights a growing divide between Tesla’s aggressive futuristic vision and the financial realities of its current product lineup.
The Analyst’s Dissent: Profitability vs. Hype
Gary Black, who divested The Future Fund from its Tesla holdings last year but continues to cover the stock due to its significance in the technology and autonomy sectors, has never been one to shy away from critiquing Tesla’s management decisions. His latest comments were triggered by the confirmation that the Model S and Model X programs are nearing their end. According to Black, the decision creates a paradox where proven, profitable assets are being discarded in favor of a polarizing product that has yet to demonstrate the same level of financial stability.
In a statement made on social media platform X (formerly Twitter), Black outlined a stark comparison between the legacy luxury models and the brutalist electric pickup. He stated:
“IMHO it’s a mistake to keep Tesla Cybertruck which has negative brand equity and sold 10,000 units last year, and discontinue S/X which have strong repeat brand loyalty and together sold 30K units and are highly profitable. Why not discontinue CT and covert S/X to be fully autonomous?”
Black’s argument hinges on two primary metrics: brand equity and unit economics. While the Cybertruck generates immense media attention, Black suggests that much of this attention has translated into "negative brand equity," potentially alienating consumers or associating the brand with divisiveness rather than the premium innovation associated with the Model S and X. Furthermore, he points to the sales data, noting that the combined sales of the Model S and X—approximately 30,000 units in the referenced period—significantly outpaced the Cybertruck’s 10,000 units.
The Legacy of the Model S and Model X
To understand the gravity of Black’s critique, one must look at what the Model S and Model X represent. Launched in 2012, the Model S was the vehicle that proved electric cars could be desirable, fast, and capable of long-distance travel. It shattered the perception of EVs as glorified golf carts and forced the entire automotive industry to accelerate electrification plans. The Model X followed, introducing the iconic Falcon Wing doors and solidifying Tesla’s presence in the luxury SUV market.
For over a decade, these vehicles have served as the halo products for Tesla. They attracted a wealthy, loyal customer base and boasted some of the highest profit margins in the industry. Black’s contention is that discarding these established revenue streams is premature, especially when the replacement strategy involves unproven robotics and a pickup truck that occupies a niche, albeit loud, corner of the market.
The "strong repeat brand loyalty" Black mentions is a critical asset. Owners of the Model S and X often upgrade to newer versions of the same cars. By removing these options, Tesla risks forcing these high-value customers to look elsewhere—perhaps to competitors like Lucid, Mercedes-Benz, or Porsche—thereby ceding a segment of the market Tesla dominated for years.
The "Honorable Discharge": Musk’s Vision for Fremont
Despite the financial logic presented by analysts like Black, Elon Musk remains steadfast in his vision for Tesla’s next chapter. On Wednesday, Musk confirmed the transition of the Fremont Factory, marking the official beginning of the end for the legacy platforms. He described the move as an "honorable discharge" for the Model S and X, acknowledging their historical importance while asserting they no longer fit the company’s primary mission.
Musk’s perspective is driven by a fundamental shift in Tesla’s identity. The company is no longer just an automaker; it is positioning itself as an AI and robotics firm. The manufacturing space currently occupied by the Model S and X at the Fremont facility is slated for the production of the Optimus Gen 3 robot. This underscores Musk’s belief that humanoid robots will eventually eclipse the automotive business in value.
Furthermore, regarding the automotive division, the focus has narrowed entirely to autonomy. Musk stated that the Model S and X are not major contributors to this future, which will instead be shouldered by the high-volume Model 3 and Model Y, alongside the purpose-built Cybercab. In this worldview, low-volume luxury cars, regardless of their profitability, are distractions from the goal of mass-market autonomous transport.
The Cybertruck’s Role in the Future Fleet
The survival of the Cybertruck in this strategic reshuffle has been a point of contention. Why keep the polarizing polygon while killing the elegant sedans? According to Musk, the Cybertruck serves a functional utility that the Model S and X do not. While the legacy models are passenger vehicles, the Cybertruck is viewed as a tool for logistics and utility.
Musk has indicated that the pickup will be essential for the "transportation of local goods." As Tesla envisions a future run by autonomous networks, the Cybertruck is being positioned to handle the heavier lifting—literally. Whether it is construction materials, equipment, or large deliveries, a robust autonomous fleet requires a vehicle with a bed and high towing capacity. The Model S and X, designed for human passengers, cannot fulfill this logistical role.
Additionally, Musk confirmed that the Cybertruck would be transitioned to an autonomous line. This suggests that future iterations of the truck may be stripped of driver-centric features, focusing entirely on its utility as an autonomous hauler. Despite reports of "underwhelming" sales relative to the massive production capacity installed, the Cybertruck remains the best-selling electric pickup on the market, outlasting competitors who have scaled back their EV truck ambitions due to softening demand.
Analyzing "Negative Brand Equity"
One of the most striking aspects of Gary Black’s criticism is the concept of "negative brand equity" regarding the Cybertruck. In marketing and finance, brand equity refers to the value premium that a company generates from a product with a recognizable name when compared to a generic equivalent. Positive brand equity means customers trust the product and are willing to pay more for it.
Black suggests the Cybertruck suffers from the opposite. The vehicle has been plagued by polarized public opinion, concerns over build quality, and a design that many find abrasive. While it has a cult following, it also attracts significant detraction. For a mass-market brand, this polarization can be dangerous.
- The Halo Effect vs. The Wedge: The Model S created a "halo effect," making electric cars cool and aspirational. The Cybertruck, arguably, acts as a "wedge," splitting the consumer base.
- Market Fit: The Model S and X fit seamlessly into the luxury market. The Cybertruck challenges the traditional truck market but has faced hurdles in winning over conventional truck buyers who prioritize utility over brutalist aesthetics.
By keeping the Cybertruck and cutting the S/X, Tesla is betting that the utility of the truck in an autonomous network outweighs the current sentiment issues. Black, however, views this as a destruction of value, arguing that the S and X could have been retrofitted for autonomy more effectively than the Cybertruck, maintaining the luxury clientele while advancing the technology.
Consumer Reaction and the Loss of the Flagship
The news of the Model S and X discontinuation has elicited strong emotional responses from the Tesla community. For many, these cars are the pinnacle of the Tesla experience. They offer the greatest range, the fastest acceleration (in Plaid trim), and the most interior space for families—specifically the six and seven-seat configurations of the Model X.
The transition to a lineup dominated by the smaller Model 3, Model Y, and the two-seater Cybercab leaves a gap in the market. As noted in reports, Tesla’s future focus is on smaller ride-sharing vehicles, predicated on data suggesting the vast majority of rides consist of two or fewer passengers. While statistically accurate for ride-hailing, this ignores the use case of families who purchase vehicles for road trips, school runs, and cargo capacity.
Fans have expressed dismay that the "largest car in the company’s lineup" is disappearing. By removing the Model X, Tesla effectively exits the large family hauler segment, forcing loyal customers with more than two children to look at competitors like the Rivian R1S or the Kia EV9. This migration of loyal customers is exactly the scenario Gary Black warns against.
The Financial Gamble: Autonomy or Bust
Ultimately, this disagreement between a seasoned analyst and a visionary CEO boils down to risk appetite and time horizons. Gary Black looks at the balance sheet today: the Model S and X are profitable, loved, and stable. The Cybertruck is expensive to build, difficult to scale, and polarizing. From a traditional investment standpoint, you keep the cash cows and cut the experiments.
Elon Musk, however, is operating on a timeline where human-driven cars are obsolete relics. In his view, continuing to pour resources into the Model S and X is akin to BlackBerry continuing to refine physical keyboards in the age of the iPhone. The resources—factory floor space, engineering talent, and capital—are finite. Musk is betting the entire company on the premise that Optimus and the Cybercab will generate value orders of magnitude higher than selling luxury sedans ever could.
The risk is substantial. If the timeline for general-purpose robotics and Level 5 autonomy stretches longer than anticipated, Tesla will have voluntarily cut off a high-margin revenue stream without an immediate replacement. The Cybertruck, with its high production costs, may not be able to fill that profitability gap in the interim.
Conclusion
The impending discontinuation of the Model S and Model X marks the end of the first chapter of Tesla’s history. It is a sentimental and financial shock to many, including analysts like Gary Black who see continued value in the legacy fleet. Black’s call to discontinue the Cybertruck instead highlights the friction between traditional automotive business logic and Tesla’s radical pursuit of a sci-fi future.
As the Fremont Factory prepares to retool for robots, and the Cybertruck gears up to haul local goods in an autonomous world, the market will watch closely. Will the "negative brand equity" of the Cybertruck improve as it finds its utility role? Or will Tesla regret walking away from the customers who built the brand by buying its flagship luxury cars? Only the future—and the success of the Optimus bot—will tell.
