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By Jesus Mesa and Gabe Whisnant
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Tesla lost its crown as the world’s top electric vehicle maker Friday after a second straight year of falling sales driven by expiring U.S. tax credits, overseas competition and backlash over Elon Musk’s politics.
The company said it delivered 1.64 million vehicles in 2025, down 9 percent from a year earlier. Chinese rival BYD sold 2.26 million vehicles last year, seizing the global lead. The reversal marks a stunning turn for Musk, who once dismissed BYD as a threat while Tesla dominated the EV market.
Tesla's fourth-quarter results were particularly stark, with just 418,227 vehicles delivered — falling short of analysts' lowered expectations of 440,000. The numbers highlight a broader cooling in the U.S. EV market, driven in part by the elimination of a federal tax credit for electric car purchases.
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Why It Matters
Tesla’s market dominance has also come under pressure from consumers critical of Musk’s political alignment with the Trump administration. Musk briefly led the Department of Government Efficiency, or DOGE, overseeing federal workforce cuts and program reductions, before stepping down in May to refocus on Tesla. The association, combined with his increasingly polarizing online persona, has contributed to a backlash among some buyers.
What To Know
The reversal in fortunes marks a historic moment for a company that helped mainstream electric vehicles and once set its sights on selling 20 million cars annually by 2030. Now, analysts say Tesla's future appears increasingly tied to ventures in autonomous driving, robotics and energy infrastructure.
The numbers highlight a broader cooling in the U.S. EV market, driven in part by the expiration of a federal $7,500 tax credit for electric vehicle purchases that had helped support demand for years. Tesla accounts for about 45 percent of all electric vehicles sold in the United States.
Despite the drop in deliveries and profit expectations, Tesla stock rose 11 percent over the year, ending at $441.15. Investors appear to be banking on Musk’s long-term vision beyond traditional vehicle sales, particularly his push into self-driving technologies and robotics.
Tesla has begun piloting its robotaxi program in Austin, initially with safety drivers but now testing fully driverless operations. The company plans to expand the service to additional cities in 2026, though it faces stiff regulatory scrutiny and competition from Alphabet’s Waymo, which has been operating autonomous taxis for years.
The company's pivot away from car sales and toward automation is evident in its recent product roadmap. In October, Tesla introduced lower-cost versions of its Model 3 and Model Y, priced below $37,000 and $40,000 respectively, aiming to recapture price-sensitive markets in Europe and Asia.
But analysts are forecasting a 3 percent drop in overall fourth-quarter sales and a nearly 40 percent decline in earnings per-share when Tesla reports earnings later this month.
Tesla’s leadership has tried to keep Musk focused with bold financial incentives. In November, shareholders approved a new compensation package for Musk. And in a separate boost, the Delaware Supreme Court recently reinstated his $55 billion pay award from 2018 that had previously been voided.
Musk may soon see another financial windfall. Analysts anticipate that the planned initial public offering of his private space company, SpaceX, could make him the world’s first trillionaire.
What People Are Saying
Tesla Chair Robyn Denholm, in a letter to shareholders posted on Tesla's X account in October, wrote: "I feel strongly—as do the rest of my colleagues on our board—that Elon singularly possesses the leadership characteristics and technical manufacturing know-how to keep us on the path toward maximizing long-term shareholder value as well as social good. We at Tesla are laser-focused on exceptional performance—not promises—and we structure our awards in line with this principle."
Musk, in a post on his personal X account in December 30, said: "Tesla Model Y is now officially the world’s best-selling car for the third year in a row".
What Happens Next
Musk remains publicly bullish about the future. He has said he expects hundreds of thousands of Tesla vehicles to achieve full autonomy by the end of this year and has teased the debut of a steering-wheel-free “Cybercab” in 2026.
Update 1/2/26, 1:51 p.m. ET: This article was updated with additional information.
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This is a breaking news story. Updates to follow.
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