Tesla has lost its title as the world’s largest electric vehicle maker to China’s BYD after its annual sales fell for a second straight year, hit by intensifying competition, the expiry of US tax credits and a cooling of demand, according to company data released on Thursday.
Global electric vehicle sales rose about 28 percent last year, but Tesla’s deliveries declined by roughly 8.6 percent in 2025, allowing BYD to overtake the US automaker on an annual basis for the first time. The Chinese group was boosted by rapid growth in overseas markets, particularly Europe, where it has steadily widened its lead over Tesla.
The shift marks a symbolic turning point in the global EV race, highlighting mounting pressure on Tesla as rivals expand product line-ups and compete aggressively on price and technology.
Tesla has faced especially stiff competition in Europe, raising questions about its ability to revive its core auto business as chief executive Elon Musk increasingly steers the company towards new ventures such as robotaxis, humanoid robots and artificial intelligence.
Shares in Tesla fell around two percent in afternoon trading following the release of the figures.
“Investors are so focused on the future with Tesla that they are ignoring delivery numbers,” said Dennis Dick, a trader at Triple D Trading, which holds Tesla shares. “It’s about Optimus, Robotaxi and physical AI.”
The company’s performance was also weighed down by the end of US electric vehicle tax credits, which had helped support demand in recent years. Deliveries in the third quarter were boosted by a rush among buyers to lock in federal incentives worth up to $7,500 before the Trump administration ended the programme in September.
Demand softened in the final months of the year. In the United States, electric vehicles accounted for 6.2 percent of retail vehicle sales in the fourth quarter, down sharply from a year earlier, while average transaction prices climbed to more than $53,000, according to data from J.D. Power.
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Tesla said it delivered 418,227 vehicles in the October–December period, a drop of 15.6 percent from the same quarter a year earlier and below analysts’ expectations. For the full year, deliveries totalled 1.64 million vehicles, down from 1.79 million in 2024 and slightly below market forecasts.
The weaker performance had largely been anticipated by investors, analysts said, given the end of tax incentives and growing competition.
“The decline in deliveries was not a major surprise, as the market had already priced in softer demand after US EV tax credits ended,” said Seth Goldstein, a senior equity research analyst at Morningstar.
By contrast, BYD has continued to expand rapidly, benefiting from strong domestic demand in China and an aggressive push into foreign markets. The company has steadily narrowed the gap with Tesla in recent years before surpassing it in annual sales.
Tesla said it achieved a bright spot outside its vehicle business, deploying a record 14.2 gigawatt-hours of energy storage products during the year, underscoring growth in its battery and power solutions division.
The company is due to report its fourth-quarter financial results on January 28, with investors closely watching for signals on demand trends, margins and the pace of progress in its autonomous driving and robotics ambitions.
As competition intensifies and subsidies fade, analysts say 2026 could prove a pivotal year for Tesla’s core car business, even as Musk bets on longer-term technologies to drive the company’s next phase of growth.
