Sales fall for second straight year amid rising pressure
Tesla has lost its position as the world’s top electric vehicle seller after global deliveries declined for a second consecutive year, marking a major shift in the competitive EV landscape.
The company delivered 1.64 million vehicles in 2025, a 9 percent drop from the previous year. Chinese automaker BYD overtook Tesla with 2.26 million vehicles sold, becoming the new global leader in electric vehicle sales.
Political backlash and policy changes weigh on demand
Tesla’s slowdown comes amid growing consumer backlash over Elon Musk’s political positions, the expiration of key U.S. tax incentives for electric vehicles, and intensifying competition abroad. The removal of a $7,500 federal EV tax credit in late 2025 significantly dampened demand in the U.S. market.
Despite public support from President Donald Trump earlier in the year, Tesla struggled to regain momentum as buyers turned more cautious and alternatives expanded across Europe and Asia.
Weak fourth quarter deepens concerns
Fourth quarter deliveries totaled 418,227 vehicles, falling well below analyst expectations. Tesla shares declined following the release, reflecting investor concern over slowing growth in the company’s core automotive business.
New lower priced versions of the Model Y and Model 3 were introduced late in the year, with prices starting below $40,000. These models are expected to improve Tesla’s competitiveness internationally, particularly against Chinese manufacturers.
Investors look beyond car sales
Despite declining vehicle sales, Tesla shares finished 2025 higher, supported by investor optimism around the company’s future in autonomous driving, energy storage, and robotics. Musk has increasingly emphasized robotaxis and humanoid robots as Tesla’s long-term growth engines.
The company began rolling out its robotaxi service in Austin last year and plans to expand to additional cities. Tesla also aims to launch production of its fully autonomous Cybercab in 2026.
Regulatory risks remain
Tesla faces growing regulatory scrutiny, including multiple safety investigations and legal challenges related to its self-driving technology. In California, the company risks a temporary suspension of its vehicle sales license over claims it misled consumers.
Analysts expect sales and profits to stabilize as 2026 progresses, though execution risks remain high as Tesla pivots away from traditional car sales toward software driven mobility and artificial intelligence.