Tesla annual sales fall 9% as BYD takes global EV lead

Tesla reported a 9% fall in annual sales for 2025, delivering 1.63 million vehicles globally compared to 1.79 million in 2024. This decline marks the second consecutive year that Tesla’s annual sales have fallen, according to figures released by the company. The downturn coincides with Chinese competitor BYD overtaking Tesla as the global EV sales leader, with BYD delivering 2.26 million EVs in 2025. Of Tesla’s 2025 deliveries, about 50,850 vehicles consisted of other models, a category that includes the Cybertruck, Model X, and Model S. This shift in leadership comes as Tesla’s market share in Europe and China faces erosion from Chinese competitors, though these rivals are currently barred from selling vehicles in the United States.

The company’s fourth-quarter performance was particularly weak, which seems to have been driven by the elimination of the $7,500 federal tax credit—a U.S. government incentive for EV purchases. This policy change led to a sharp contrast between the final two quarters of the year:

• Fourth-quarter sales reached 418,227 vehicles, representing a 15.6% drop compared to the same period in the prior year.
• Third-quarter sales had previously hit a record-breaking 497,099 vehicles, marking a 29% increase from the previous quarter as consumers rushed to buy before the incentive expired. Since the expiration of the tax credit, sales have retreated despite efforts to attract buyers. Following the New Year holiday, the market responded to the fourth-quarter figures, and Tesla stock fell more than 2% as trading opened.

Amid these automotive headwinds, CEO Elon Musk is pivoting Tesla’s focus away from the business of manufacturing EVs and toward AI and robotics. Musk is pitching an ecosystem of “sustainable abundance”—a concept outlined in Master Plan IV, Tesla’s strategic document regarding sustainable products. This plan describes an ecosystem of sustainable products ranging from transport to energy generation, battery storage, and robotics. Despite this strategic pivot, the company remains heavily reliant on its EV business. For example, Tesla generated $28 billion in third-quarter revenue, of which $21.2 billion came from selling EVs.

Why it matters

Tesla is transitioning from a pure-play EV manufacturer to an AI and robotics firm, a shift occurring just as its core automotive business faces stiff global competition and slowing growth.