Tesla Annual Sales Drop 9% as BYD Overtakes It as the World’s Largest EV Seller

Tesla’s annual vehicle sales declined for the second consecutive year, weighed down by the loss of U.S. federal tax incentives and growing competition, particularly from Chinese automakers.

The electric vehicle maker delivered 1.63 million vehicles worldwide in 2025, a 9% decrease from 1.79 million in 2024, according to company figures. Of the total deliveries, roughly 50,850 vehicles fell under Tesla’s “other models” category, which includes the Cybertruck and the ageing Model S and Model X.

The slowdown was especially pronounced in the fourth quarter. Tesla reported 418,227 deliveries during the period, representing a 15.6% year-over-year decline and coming in well below analyst expectations. Shares of Tesla fell more than 2% in early trading following the New Year holiday.

Once the undisputed global leader in electric vehicle sales, Tesla has seen its position weakened in key markets such as Europe and China, where competition from Chinese manufacturers has intensified. BYD, China’s largest EV maker, delivered 2.26 million electric vehicles in 2025, surpassing Tesla to claim the top spot globally. While Tesla is also facing increasing competition in the U.S., Chinese automakers remain largely absent from the American market due to regulatory barriers.

A significant factor behind Tesla’s fourth-quarter slump appears to be the expiration of the $7,500 federal EV tax credit in the United States. Ahead of the incentive’s removal, Tesla posted a record 497,099 deliveries in the third quarter, a 29% jump from the previous quarter, as buyers rushed to secure vehicles before the subsidy ended. Since then, demand has cooled despite Tesla’s efforts to stimulate sales.

The decline in vehicle deliveries comes as CEO Elon Musk continues to reposition Tesla as more than just an automaker, emphasising artificial intelligence, robotics, and energy systems. Musk has framed this shift around the concept of “sustainable abundance,” a central theme in Tesla’s recently unveiled Master Plan IV, which outlines a future built on interconnected systems spanning transportation, energy generation, battery storage, and robotics.

Despite that long-term vision, electric vehicles remain Tesla’s core business and primary revenue driver. In the third quarter alone, the company reported $28 billion in total revenue, with $21.2 billion coming directly from vehicle sales.