Tesla Annual Sales Drop 9% as BYD Overtakes
Tesla’s annual vehicle sales declined for a second consecutive year. Overall, deliveries fell 9% as competition intensified and U.S. incentives changed. Specifically, the company delivered 1.63 million vehicles globally in 2025, down from 1.79 million in 2024. Notably, about 50,850 deliveries fell under “other models,” which include the Cybertruck, Model X, and Model S.
Meanwhile, fourth-quarter performance weakened sharply. Tesla delivered 418,227 vehicles in the quarter, representing a 15.6% year-over-year decline. Consequently, the results exceeded analysts’ downside expectations. Following the New Year holiday, Tesla shares dropped more than 2% as markets opened.
Rising competition and policy shifts
Tesla has lost its position as the world’s top EV seller. In particular, market share erosion in Europe and China has accelerated as Chinese automakers expanded rapidly. As a result, BYD moved into the global sales lead after delivering 2.26 million EVs in 2025. In contrast, Tesla still faces limited Chinese competition in the United States because regulators block those vehicles.
However, policy changes appear to have had the strongest short-term impact. The removal of the $7,500 U.S. federal EV tax credit weighed heavily on fourth-quarter demand. Previously, Tesla posted record third-quarter deliveries of 497,099 vehicles, a 29% jump from the prior quarter. At that time, buyers rushed purchases before the incentive expired. Since then, sales momentum has slowed despite renewed marketing efforts.
Strategic pivot amid revenue dependence
Tesla’s sales decline coincides with CEO Elon Musk’s push to reposition the company. Increasingly, he has emphasized artificial intelligence and robotics over vehicle manufacturing. Moreover, Musk argues that future growth lies in “sustainable abundance,” a theme repeated throughout Master Plan IV. That vision describes an ecosystem spanning transport, energy generation, battery storage, and robotics.
Yet, the company still relies heavily on electric vehicles for revenue. For example, Tesla generated $28 billion in revenue during the third quarter. Of that total, $21.2 billion came directly from EV sales. Therefore, even as strategic priorities evolve, vehicle performance remains central to Tesla’s financial health.
