Elon Musk promised a “major rebound” for Tesla in 2025. Instead, the company fell behind its biggest Chinese rival.
Tesla lost its crown as the world’s best-selling electric vehicle maker on Friday as a customer revolt against Elon Musk’s right-wing policies, the expiration of U.S. tax breaks for buyers and strong foreign competition drove down sales for the second year in a row.
Tesla said it delivered 1.64 million vehicles in 2025, down 9% from the previous year.
Chinese rival BYD, which sold 2.26 million vehicles last year, is now the largest electric vehicle maker.
It’s a stunning reversal for an automaker whose growth once seemed unstoppable, overtaking traditional automakers with far more resources and helping to make Musk the world’s richest man. The decline in sales occurred despite President Donald Trump’s marketing efforts early last year, when he called a news conference to praise Musk as a “patriot” in front of the Teslas lined up in the White House driveway, then announced he would buy one, bucking presidential precedent of not endorsing products from private companies.
For the fourth quarter, Tesla sales totaled 418,227 units, even short of the much reduced target of 440,000 units expected by analysts recently surveyed by FactSet. Sales were hit hard by the expiration of a $7,500 tax credit for purchasing electric vehicles, which was phased out by the Trump administration in late September.
Tesla stock fell 2.6% to $438.07 on Friday.
Even with multiple problems rocking the company, investors are betting that Tesla CEO Musk can realize his ambitions to make Tesla a leader in robotaxi services and inspire consumers to adopt humanoid robots that can perform basic tasks in homes and offices. Reflecting this optimism, the stock ended 2025 with a gain of around 11%.
The latest quarter was the first with sales of slimmed-down versions of the Model Y and Model 3 that Musk unveiled in early October as part of an effort to revive sales. The new Model Y costs just under $40,000, while customers can purchase the cheaper Model 3 for under $37,000. These versions should help Tesla compete with Chinese models in Europe and Asia.
For fourth-quarter results released in late January, analysts expect the company to post a 3% decline in sales and a nearly 40% drop in earnings per share, according to FactSet. Analysts expect the downward trend in sales and profits to eventually reverse as 2026 progresses.
Musk said earlier last year that a “major rebound” in sales was underway, but investors were undeterred when that failed to pan out, choosing instead to focus on Musk’s pivot into different lines of business. He said the company’s future lies in its driverless robotaxis service, its energy storage business and building robots for the home and factory – and much less on selling cars.
Tesla began rolling out its robotaxi service in Austin in June, first with safety monitors in the cars to take over if something goes wrong and then testing without them. The company hopes to roll out the service in several cities this year.
To achieve this, it must take on rival Waymo, which has been operating autonomous taxis for years and has many more customers. It will also face regulatory challenges. The company is the subject of several federal security investigations and other investigations. In California, Tesla faces temporarily losing its license to sell cars in the state after a judge ruled it misled customers about their safety.
“Regulation is going to be a major issue,” said Wedbush Securities analyst Dan Ives, a well-known bull on the stock. “We care about people’s lives.”
Ives nonetheless said he expects Tesla’s autonomous offerings to overcome any setbacks soon.
Musk said he hoped software updates to his cars would allow hundreds of thousands of Tesla vehicles to operate autonomously without human intervention by the end of this year. The company also plans to begin production of its AI-powered Cybercab, without a steering wheel or pedals, in 2026.
To keep Musk focused on the company, Tesla directors gave Musk a potentially huge new compensation package that shareholders supported at the November annual meeting.
Musk scored another huge windfall two weeks ago when the Delaware Supreme Court overturned a ruling that stripped him of the $55 billion pay package Tesla doled out in 2018.
Musk could become the world’s first billionaire later this year when he sells shares of his rocket company SpaceX to the public for the first time, in what analysts expect to be a blockbuster IPO.
____
AP video journalist Mustakim Hasnath contributed to this report from London.
