Tesla has officially lost its crown. For the second consecutive year, the automaker’s annual sales have declined. More importantly, Chinese rival BYD has overtaken Tesla to become the new global leader in electric vehicles.
According to figures released by the company, Tesla delivered 1.63 million vehicles globally in 2025. This represents a stark 9% drop from the 1.79 million vehicles delivered in 2024. Consequently, the market reacted poorly. Tesla stock fell more than 2% as the market opened after the New Year holiday.
BYD Takes the Throne
Tesla, once the undisputed king of EVs, is seeing its dominance erode. Chinese automaker BYD delivered a massive 2.26 million EVs in 2025, effectively seizing the top global sales spot.
While Tesla faces stiff competition in the United States, it is notably not from Chinese automakers, which are currently barred from selling there. Instead, Tesla’s market share in Europe and China has crumbled due to the rise of these Chinese competitors.
The company’s specific breakdown shows that about 50,850 of its 2025 deliveries were “other models”. This collection includes the “Cybertruck”, along with the older “Model S” and “Model X”.
The Tax Credit Blow
Competition hurt Tesla, but the elimination of the $7,500 U.S. federal tax incentive delivered the knockout blow. The impact was immediately visible in the fourth quarter. Tesla reported Q4 sales of 418,227 vehicles, a significant 15.6% drop compared to the same period last year. This figure was far worse than analysts expected.
In contrast, the third quarter saw record-breaking numbers. Tesla sold 497,099 vehicles in Q3, a 29% increase from the previous quarter. However, this surge was artificial. Consumers raced to buy EVs before the federal tax credit disappeared. Once the incentive vanished, sales retreated, despite Tesla’s subsequent efforts to woo buyers.
Musk’s Pivot vs. Financial Reality
Amidst this decline, CEO Elon Musk is attempting a major strategy shift. He is trying to pivot the company away from making and selling EVs. Instead, he is focusing on AI and robotics. Musk’s new pitch centres on “sustainable abundance”, a concept from the recent “Master Plan IV” that describes an ecosystem of transport, energy generation, and robotics.
Nevertheless, the numbers tell a different story. The bulk of Tesla’s income still relies heavily on its struggling EV business. For instance, in the third quarter, Tesla generated $28 billion in revenue. Of that total, $21.2 billion came strictly from selling electric vehicles. Musk may want to build robots, but cars are still paying the bills.
