Jan. 29, 2026 | Tesla axes Model S and Model X; why kei cars are “doomed” in U.S.

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Welcome to Daily Drive. For Thursday, January 29, 2026, I'm Kellan Walker in Las Vegas. Today on

the show, Tesla is ending production of its Model S and Model X to make way for robots. Hyundai is

pulling the plug on the Santa Cruz pickup after one generation and Toyota post-record global sales

powered by surging hybrid demand. Plus, automotive news Asia editor Hans Grimel explains why he

doesn't think Japanese K cars will work in the U.S. market despite President Trump's push.

There is a body structure to these cars, but it's closer to a tin can than to a tank.

Let's run through all the news you need to know to keep up in the auto industry.

Tesla is ending production of its Model S sedan and Model X crossover next quarter

to make room for something radically different, a humanoid robot factory. CEO Elon Musk announced

the move is part of Tesla's shift from car maker to what he calls a physical AI provider.

The Model S launched in 2012 and put Tesla on the map. The Model X followed in 2015,

but combined with the Cybertruck, sales for those models dropped 40% last year to just over 50,000

units. Musk says Tesla will convert the Fremont factory space into an Optimus robot assembly line

targeting a million units annually. The move comes as Tesla reported its first ever annual

revenue decline down 3% in 2025 and a 61% drop in fourth quarter net income. We'll hear more on

this story in a minute with our own Lawrence Eiliff. Hyundai is also taking the axe to part

of its lineup. The Korean automakers pulling the plug on its Santa Cruz compact pickup

after just one generation. Sources tell Automotive News the move comes as sales plunged

20% to 25,500 units last year, outsold 6 to 1 by Ford's Maverick.

Admins director Ivan Drury says Hyundai pushed too far in the direction of oddity versus conformity

with design choices that hurt functionality. The automaker isn't abandoning trucks though,

a larger body on frame midsize pickup targeting the Tacoma and Ranger launches in summer 2029.

Meanwhile, Hyundai's fourth quarter operating profit crashed 40% on U.S. tariffs and EV incentive

cuts. Tariffs cost the company $4.1 trillion last year. That's about $2.8 billion at today's exchange

rate. But investors are betting on Hyundai's humanoid robot plans. Shares jumped 7% despite

the weak earnings. And Toyota just posted record global sales 11.3 million vehicles in 2025.

That's up nearly 5%. The big story? Strong U.S. demand helped Toyota blow past the 15%

tariff on Japanese imports. Sales there climbed 8% powered by surging hybrid demand. Toyota ramped

up both U.S. production hitting a record 1.4 million units and exports from Japan to meet that

demand. Hybrids are carrying the load 4.4 million sold worldwide while EVs barely moved just under

$200,000. Toyota stayed ahead of Volkswagen and Hyundai to keep its global sales crown in 2025.

And those are today's headlines. You can find more details on all those stories at autonews.com.

Joining me now to discuss Tesla's decision to end Model S and Model X production is automotive news

reporter Lawrence Eiliff, who covers Tesla for us. Lonnie, welcome back to Daily Drive.

It's great to be here. So Lonnie, what is ending these flagship model signal for Tesla's future

product strategy? Okay, so they've been talking a lot about making this transition from being

an automaker to being a physical IA maker, which means robotexies and robots and transportation

as a service. And what's really striking about this is this is really them putting the money

where their mouth is. One analyst said they're burning their bridges, which I think he meant

burning their boats, you know, like this is it, you know, we can't go back. And so they're

canceling next quarter the Model S and the Model X. Now it's both operationally important because

now they get that factory space in the Bay Area in AI central to build their robots.

But it's also symbolically important. Remember, this is the Model S was their first

volume vehicle after the handmade roadsters. But this was the one that launched them into

becoming a real automaker and not just kind of a dreamy startup. And then the Model X came in 2015,

three, three row SUV. And so, you know, it's, it's important, but it's really a very strong signal

rather than just talking about it, that they're making this transition. Well, we've talked many

times about how Tesla's aging lineup seems to be hurting sales. Now it's simply tossing out,

almost I'd say what half of that lineup. Is there any plan or expectation to replace them

with something new? Now, it's important to remember this is intentional. They had the

opportunity three years ago, and they talked about it three years ago to create a $25,000 car.

They were going to start with the factory in Mexico, right, lower labor cost, lower supply base,

and then have these factories all over the world. And if there was going to be like, you know,

just insane millions of these $25,000 cars, they changed route. Elon Musk, the CEO said,

nope, okay, we're going to go all in on autonomy. Everything is autonomy. Everything is AI. And so,

their next car coming before the end of the first half is the cyber cab, which has no steering wheel,

no pedals for human controls, completely autonomous. Elon Musk said yesterday on the earnings call,

if it doesn't drive a Katana's misle, it doesn't drive. So this is their direction. This is where

they're going. They've made, you know, a decision to do this. And somebody was joking and it's like,

we used to say Tesla's were fast sleek cars, you know, faster than a Lamborghini. And now we're

going to be saying, oh, look at my airport transportation pod. And so, you know, there's

kind of some joking about how they are really becoming a transportation as a service company.

And that's not quite as sexy as Tesla, which, if you know, the S three X, Y, their core cars

spell out sexy. Well, Tesla reported its first ever annual revenue decline and a 61% drop in

fourth quarter net income. What's going on there? And this is really part of the same narrative.

And that is that when they sold less cars last year for a second year in a row, their revenue

went down for their first year ever. And that's because they're selling less cars, they're putting

more discounts on the cars and they're transferring money, capital expenditures to their new programs,

right? So that costs money. And it's interesting because what they said yesterday, which is kind

of surprising is that their capital expenditures are going to go to $20 billion this year from

$8.5 billion last year. And that's AI, that's Robo taxis, that's robots, that's chips, that's

computers. And they're also making a $2 billion investment in Elon Musk's artificial intelligence

startup X AI. Perfect. Lonnie, always good stuff. Thank you so much for joining me.

Okay, thank you very much. You can read Lauren Siliff's reporting on Tesla at AutoNews.com.

Coming up next, automotive news Asia editor Hans Grimel explains why he thinks Japanese

K cars are doomed to flop in the US despite Trump's push to bring them here. That's next on Daily Drive.

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Welcome back to Daily Drive. I'm Kellan Walker. President Trump floated the idea of bringing

Japanese K cars to the U.S. market after his visit to Japan last October. The tiny vehicles are

engineered for dense urban areas and affordability. But automotive news Asia editor Hans Grimow says

they're doomed to flop in America. In his latest column, Hans outlines eight reasons why. From

safety concerns to performance issues to structural integrity. Our own Jake Nier reached Hans at his

home office in Tokyo. Hans Grimow, welcome back to Daily Drive. It's been too long.

Yes, it has been. Thanks for having me on.

So when I heard that you were writing a piece, eight reasons Japanese K cars won't make it here

in the United States, my question was this. Only eight?

Man, my own beer is there. Yes, I see what you're saying.

My own cynicism kicking things off here. But in all seriousness, we'll let people go and read

your article on autonews.com and see all eight. But if you had to pick one or two, what are the

biggest barriers for these kinds of cars for the United States market?

Well, I shouldn't be too hard on these K cars, these Japanese mini cars, because they are

kind of ingenious. They're kind of a masterclass in packaging. They're interesting designs. They're

not Mike up of tea, but they really do a lot with a little. In Japan, they're quite functional

and convenient. And the people who love their K cars love their K cars here. So there is an

audience for it. And there probably is a customer base for them in the United States, but a very

small one, I would guess. That's largely because of the reasons that they're probably not appealing

to the majority of Americans. It starts with everything from their tiny size to their tiny

engines and their underperformance on freeways, their slow, slow speeds. They're not especially

cheap. They're low price, but they're not especially considered a bargain for what you're

getting in terms of a car. The design is a little bit off for Americans as well. And then

there's just kind of the safety concern about driving this kind of lunchbox on a modern American

freeway surrounded by semi trucks and Ford 150 pickups. So there are a lot of things I can imagine

that would keep these off American shopping lists. Now, don't get me wrong. I actually think that

these are very, in a lot of ways, like you said, they're pretty ingenious for a lot of markets,

especially really, really dense urbanized areas of the world. You know, they're inexpensive,

which is a huge issue here in the United States. But as you said, it's mostly for me just knowing

the American car buyer in 2026. I can see why it would be tough road ahead. Now, remind us why

we're talking about K cars again. They peaked President Trump's interest recently. Why was that?

He had a summit meeting here in Japan last October, where he came to meet the new prime minister.

And he was in Japan traveling around for a bit. And after returning to the United States, he was

looking for ways to increase, let's say, Japanese investment in the auto industry in the United

States. That was one of the big themes he was talking about here. And he saw the K cars. He

learned that they were affordable. Affordability is a big issue in the United States as well.

So he thought, why not kill two birds with one stone? Invite the Japanese to America to build

their affordable K cars in the USA? And what could go wrong? There are lots of people car buffs in

the United States who are enamored with these small K cars. But I can't see them ever catching

on in a serious way or at serious volumes. So let's talk a little bit more about the safety

aspect of this. You mentioned that K cars, they have a lot of safety, like latest safety tech

in them. So there's one thing, but when it comes to physics, can you kind of elaborate on the

scenario here in the United States, maybe a collision with an F 150 or something like that?

It seems like for one thing, it would obviously consumers care about safety, but also regulators

would probably have a lot of questions too. Well, let's talk about safety a little bit because

these cars, at least the top trim versions of these cars have all this modern safety

you know, doodads. They've got the automatic lane keep assist, adaptive cruise control,

auto pre-crash, safety braking and everything that you think you'd want probably in a even

in a bigger car like a Toyota Camry or something. But you know, people here drive differently on

different roads than they do in the United States. People here drive very slowly on the speed limits

are very low compared to the United States, even on the interstate. And perhaps more importantly,

people here drive very politely and they almost never break their rules. They're not cutting

each other off. They're not racing each other from from the stop lights. It's a very rule

abiding society in Japan. And you don't have the streets as a kind of a wild west kind of

mentality among the drivers on the streets here. So when these cars crash, when a car crashes into

a cake car at 30 miles per hour, you're going to have a fender bender. But in the United States,

if you bring your cake car up to 50, 60 miles per hour on the highway and you intertwine with

anything a little bigger than it, which will be everything else on the highway, you're going

to be in a world of hurt. The overhangs on these cars are basically nonexistence, especially in

the rear. It's just like the rear seat backs where the kids are is literally the backup against the

door. And then the front has almost no space as well, because usually they try to push the driver

as far to the front as possible, almost so that they're sitting right over the engine. So there's

not a lot of structural integrity to these cars to keep you safe. I kind of think of the old-fashioned

Volvo with the giant steel cage inside there to protect the driver. There is a body structure

to these cars, but it's closer to a tin can than to a tank. You compare it in the piece to a UGO.

Talk about why you make that comparison and why you think it's fair.

Well, it's partly fair just because of the size of the car, the size of the engine, the acceleration

speed, the performance of the cars. But it's probably not fair because the UGO, while as the UGO

was a rattle trap, poor quality car made in the eastern block, these cars have all the benefits

of world first class Japanese manufacturing and quality control. So you're not going to have to

worry about your K-car breaking down or not starting one morning or having bad fit and finish

and things like that. But in terms of performance, the average American is going to be a little

disappointed. Yeah, I think you said in the piece about 64 horsepower or 660 cc engines,

is that about right for these? That's right, that's what they're limited to. The idea of bringing

them to the United States, if you were going to make them there, I don't know what kind of K-car

they're talking about. Maybe they have a US spec K-car, for example, in which case they can maybe

wiggle with the dimensions maybe or with this engine specifications maybe or other technical

dictates to the car. I can't see them bringing lock, stock and barrel the exact same K-car that

they sell here and trying to sell it in the United States. Maybe they'd have to tweak it some way to

make it a little bit bigger, a little wider, put a bigger engine in it, increase the overhangs for

some crash, some crash zones on the front and back. Maybe then they could create a new class called

an American K-car or something like that. But it's a lot different from just a Japanese one.

Yeah, that's such an interesting idea that maybe this says something about the direction that

automakers are seeing here in the US market or maybe sort of an aspirational direction that

maybe it's not like we need to start offering these sort of, well, okay, this might not be fair,

but I was going to say glorified golf golf carts on the roads, but maybe we can learn

some things from these models that would work for the US. Do you think that that's a possible

realistic expectation that, again, maybe not as small and boxy, but maybe we get closer to

something like that that still fits American taste?

They could. They could do that. I know that the Japanese apply a lot of the

manufacturing techniques that they learn from mini cars or some of the packaging ideas that they

learn in mini cars. They take to the regular cars as well. So there is some learning, cross

fertilization of the learning there. But Japan has a whole class of cars one step up that are

even considered two and that were once sold in the United States, but are now considered even

too small for the United States. We're talking cars like the, remember the Honda Fit or the

Toyota Yaris or even something like the Mazda 2, but those were deemed too cheap or too

underperforming or too small even for American audiences because they have grown into loving

SUVs basically. There's a crossover culture there now, and those small cars, the small

hatchbacks, the small sedans don't appeal. So even if the Japanese were to go one step up,

basically mean a whole class of cars that they already make but decided to give up in the US.

All right, Hans, any last words on the K cars before we wrap up here?

Well, one of the things that I often get frustrated with with K cars is that if you go into the

countryside, especially, they're everywhere like cockroaches. That's the car of the countryside

because people just want something like a small functional thing to take them down the road to

the grocery store and back or farmers use them a lot. And so if you're on vacation in Japan

and driving out in the countryside, it's a great place to be driving until you get behind one of

these K cars. They go so slow that it's very aggravated to be stuck behind one of them,

especially when you're out in the countryside trying to enjoy the winding roads and have a

little bit of driving fun on vacation. That's so different than the US. You think of the countryside

here in America and it's nothing but F-150s and Silverados and all the above. So thank you very

much, Hans. Really appreciate this. Really loved the column. It's called Eight Reasons Japanese K

cars are doomed to flop at the US despite Trump's push. You can find that at AutoNews.com. Thanks

again, Hans. Thanks a lot, Jake. Have a good one. That's Daily Drive for today. I'm Kellan Walker.

Thanks to Automotive News Journalists Lauren Siliff and Irvash Kakaria for their reporting for

today's podcast. You can get the latest news on vehicle affordability, automaker product shifts,

and everything happening in the auto industry at AutoNews.com. Come back tomorrow for a conversation

with Cox Automotive's Jessica Stafford about the company's latest car buyer journey study.

We're seeing record high satisfaction across all buyers, but particularly new car buyers.

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Jan. 29, 2026 | Tesla axes Model S and Model X; why kei cars are “doomed” in U.S.

About this episode

Tesla Model X

Tesla Model S

Tesla Cybertruck

Hyundai Santa Cruz

Ford Maverick

Ford Ranger

Toyota Tacoma

operating profit

hybrid

EVs

Toyota Crown

cyber cab

autonomous

S3XY

capital expenditures

K cars

safety concern

lane keep assist

adaptive cruise control

auto pre-crash safety braking

Toyota Camry

fender bender

Volvo

UGO

660 cc engine

Honda Fit

Toyota Yaris

Mazda 2

crossover culture

Chevrolet Silverado

Ford F150S

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