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Tesla loses crown as world’s largest electric vehicle maker after second straight year of sales decline
Tesla has lost its position as the world’s top electric vehicle maker after sales fell for a second consecutive year, pressured by political backlash surrounding CEO Elon Musk, the expiration of U.S. tax incentives, and intensifying global competition. The company reported delivering 1.64 million vehicles in 2025, a 9% decline from the prior year. Chinese automaker BYD surpassed Tesla by a wide margin, selling 2.26 million vehicles and claiming the global lead in EV sales. The shift marks a dramatic reversal for Tesla, once viewed as an unstoppable force that reshaped the auto industry and propelled Musk to the top ranks of global wealth. The downturn came despite high-profile political support early last year, when President Donald Trump publicly praised Musk and announced plans to buy a Tesla.
Sales weakened further in the fourth quarter, with deliveries totaling 418,227 vehicles, missing even lowered expectations. A major factor was the expiration of a $7,500 federal tax credit for electric vehicles, which was phased out at the end of September, dampening demand. Tesla’s stock slipped 2.6% following the sales report, though it still finished 2025 up about 11%, reflecting investor confidence in Musk’s broader vision for the company. That optimism centers less on car sales and more on Tesla’s ambitions in autonomous driving, robotaxi services, energy storage, and humanoid robotics.
The latest quarter marked the first sales of newly introduced lower-cost versions of the Model Y and Model 3, unveiled in October to reignite demand. The updated Model Y is priced just under $40,000, while the Model 3 comes in below $37,000. Moves aimed at improving competitiveness against lower-priced rivals, particularly in Europe and Asia. Even so, expectations remain muted, with forecasts pointing to continued pressure on revenue and a sharp drop in earnings as Tesla works through pricing challenges and higher costs.
Musk has increasingly emphasized that Tesla’s future lies beyond traditional vehicle sales. The company began rolling out its robotaxi service in Austin last June, initially with safety monitors and later testing fully driverless operations. Tesla plans to expand the service to multiple cities this year, placing it in direct competition with established autonomous ride-hailing players while navigating mounting regulatory scrutiny. The company faces multiple federal safety investigations and legal challenges, including potential licensing consequences in California related to past claims about vehicle safety features.
Despite these hurdles, Musk has expressed confidence that software updates will soon allow hundreds of thousands of Tesla vehicles to operate autonomously without human intervention. Tesla is also targeting 2026 for production of its fully autonomous Cybercab, designed without a steering wheel or pedals. To keep Musk focused on executing that vision, Tesla’s board approved a massive new compensation package backed by shareholders, adding to his wealth after a court decision restored a previously blocked multibillion-dollar pay award. With plans for a future public offering of SpaceX shares, Musk’s personal fortune could climb even higher, even as Tesla works to reclaim momentum in a rapidly evolving electric vehicle market.
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