Tesla's annual vehicle sales have declined for the second consecutive year, a downturn significantly influenced by the expiration of the U.S. federal tax credit and escalating competition from Chinese automakers. This shift has culminated in China's BYD surpassing Tesla as the world's leading electric vehicle (EV) seller.
According to figures released by the company, Tesla delivered 1.63 million vehicles globally in 2025, marking a 9% fall from the 1.79 million units sold in 2024. Approximately 50,850 of these deliveries were categorized as "other models," a group that includes the Cybertruck alongside the older Model X and Model S.
The fourth quarter of 2025 saw a particularly sharp decline, with Tesla reporting 418,227 sales—a 15.6% drop compared to the same period last year and significantly below analyst expectations. This news led to Tesla stock falling more than 2% as the market opened after the New Year holiday.
Once the undisputed global EV sales leader, Tesla has witnessed its market share erode in key regions like Europe and China due to the rapid ascent of Chinese competitors. In a significant development, China's BYD delivered 2.26 million EVs in 2025, officially claiming the top spot in global EV sales. While Tesla faces increased competition in the United States, it's notably not from Chinese automakers, which are currently barred from selling vehicles in the country.
The elimination of the $7,500 U.S. federal tax incentive appears to have dealt the most substantial blow in the fourth quarter. In contrast, Tesla had achieved a record-breaking third quarter, delivering 497,099 vehicles—a 29% increase from the previous quarter—as consumers rushed to purchase EVs before the tax credit expired. Since then, sales have retreated despite various efforts to attract buyers.
These declining sales coincide with CEO Elon Musk's strategic efforts to pivot Tesla away from solely manufacturing and selling EVs towards a broader focus on artificial intelligence and robotics. Musk's vision, encapsulated in the company's recent Master Plan IV, emphasizes "sustainable abundance"—an ecosystem of sustainable products spanning transport, energy generation, battery storage, and robotics.
Despite this strategic pivot, the vast majority of Tesla's current income continues to be generated by its EV business. For instance, in the third quarter alone, Tesla reported $28 billion in revenue, with $21.2 billion directly attributed to EV sales.
