Tesla annual sales decline 9% as it’s overtaken by BYD as global EV leader

Tesla annual sales have fallen for the second year in a row, a drop fueled by the removal of the federal tax credit in the U.S. and competition from Chinese automakers.

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

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

Tesla, once the global EV sales leader, has seen its market share in Europe and China eroded by the rise of Chinese competitors. China’s BYD, which delivered 2.26 million EVs in 2025, has now taken the top global EV sales spot. Tesla is also facing more competition in the United States — although notably not from Chinese automakers which are barred from selling vehicles in the country.

But it was the elimination of the $7,500 U.S. federal tax incentive that seems to have delivered the biggest blow in the fourth quarter. Tesla sold a record-breaking 497,099 vehicles in the third quarter — a 29% increase from previous quarter — as consumers raced to buy EVs before the federal EV tax credit disappeared. Since then, sales have retreated in spite of efforts to woo buyers.

Tesla’s declining sales comes as CEO Elon Musk tries to pivot the company away from the business of making and selling EVs and towards AI and robotics. Musk’s pitch is there is money to be made in “sustainable abundance,” a catchphrase used throughout the company’s recent Master Plan IV that describes an ecosystem of sustainable products, from transport to energy generation, battery storage and robotics.

And yet, the bulk of Tesla’s income comes from its EV business. For instance, Tesla generated $28 billion in revenue in the third quarter, of which $21.2 billion came from selling EVs.