Tesla has lost its title as the world's largest electric vehicle manufacturer to China's BYD after its annual sales fell for the second year in a row, hit by growing competition, the expiration of tax breaks in the US and negative reactions to the brand from some in the public.
While global sales of electric vehicles rose 28 percent last year, BYD surpassed Tesla for the first time on an annual basis, thanks to strong growth in Europe, where the Chinese manufacturer is further increasing its advantage over its American rival, Reuters reports.
Tesla, whose sales fell about 8,6 percent in 2025, faces fierce competition, especially in Europe, raising questions about its ability to revive its core automotive business at a time when CEO Elon Musk is increasingly steering the company toward robo-taxis and humanoid robots.
Tesla shares fell more than one percent in morning trading.
"Investors are so focused on Tesla's future that they're ignoring the delivery numbers. It's all about Optimus, robo-taxis and physical AI," said Dennis Dick, a trader at Triple D Trading, which owns Tesla shares.
Expiration of US tax breaks hits Tesla
Tesla's fourth-quarter results come after third-quarter deliveries were boosted by a rush by customers to take advantage of a $7.500 federal tax credit, before President Donald Trump's administration decided in September to end the incentive.
Tesla said it delivered 418.227 vehicles in the October-December period, down 15,6 percent from 495.570 in the same period a year earlier. Analysts had expected 434.487 vehicles, down 12,3 percent, according to data from Visible Alpha.
On an annualized basis, Tesla delivered 1,64 million vehicles, compared to 1,79 million in 2024. Analysts surveyed by Visible Alpha had expected about 1,65 million vehicles delivered, which would mark the company's second consecutive annual decline.
The drop in deliveries was not a big surprise, given that the market had already priced in weaker demand after the elimination of tax breaks for electric vehicles in the U.S., said Seth Goldstein, senior equity research analyst at Morningstar.
At the same time, Tesla said it had installed a record 14,2 gigawatt-hours (GWh) of energy storage systems. The company is scheduled to report fourth-quarter results on January 28.
Increased competition in North America and Europe
Growing competition from Chinese and European manufacturers, such as BYD, Volkswagen and BMW, has further weakened Tesla's sales momentum.
BYD said that sales outside China in 2025 reached a record one million vehicles, an increase of about 150 percent compared to 2024. The company said it aims to sell up to 1,6 million vehicles outside China in 2026, although it did not release an overall sales projection.
Tesla introduced simplified "Standard" versions of the Model Y and Model 3 in October, priced about $5.000 lower than previous base versions, seeking to maintain sales volume after the loss of tax breaks and attract customers in Europe looking for cheaper options.
This move disappointed some investors, who were expecting a larger price reduction or a completely new, more mass-produced model.
Although vehicle deliveries have weakened, Tesla shares rose by about 11,4 percent in 2025, further increasing Elon Musk's wealth.
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