Tesla’s annual sales fell 9% as BYD overtook it as the global leader in electric vehicles

Tesla’s annual sales fell for the second year in a row, a decline fueled by the removal of a federal tax break in the United States and competition from Chinese automakers.

Tesla delivered 1.63 million vehicles globally in 2025, down 9% from 1.79 million in 2024, according to figures released by the company. Notably, about 50,850 of these vehicles are considered “other models,” a group that includes the Cybertruck as well as the older Model

Tesla reported fourth-quarter sales of 418,227 vehicles, down 15.6% from the same period last year and much more than analysts expected. Tesla stock fell more than 2% as the market opened after the New Year’s holiday.

Tesla, once the global leader in electric vehicle sales, has seen its market share in Europe and China eroded by the rise of Chinese competitors. China’s BYD, which delivered 2.26 million electric cars in 2025, ranked first in global electric car sales. Tesla also faces more competition in the United States, although it is not one of the Chinese automakers that is banned from selling cars in the country.

But it was the elimination of the $7,500 US federal tax incentive that appeared to deal the biggest blow in the fourth quarter. Tesla sold a record 497,099 vehicles in the third quarter — a 29% increase from the previous quarter — as consumers raced to buy electric vehicles before the federal EV tax credit disappeared. Since then, sales have declined despite efforts to attract buyers.

Tesla’s sales decline comes as CEO Elon Musk tries to shift the company away from the business of making and selling electric cars and toward artificial intelligence and robotics. Musk argues that money can be made through “sustainable abundance,” a slogan used in the company’s recent Fourth Master Plan that describes an ecosystem of sustainable products, from transportation to power generation, battery storage and robotics.

However, the bulk of Tesla’s income comes from its electric vehicle business. For example, Tesla generated $28 billion in revenue in the third quarter, of which $21.2 billion came from selling electric vehicles.