Elon Musk promised a ‘major rebound’ for Tesla in 2025; instead, it lagged its top competitor from China
Tesla lost its crown as the world’s bestselling electric vehicle maker on Friday as a customer revolt over , expiring U.S. tax breaks for buyers and stiff overseas competition pushed sales down for a second consecutive year.
Tesla reported delivering 1.64 million vehicles in 2025, a 9% drop from the previous year.
Its Chinese rival , which sold 2.26 million vehicles last year, is now the largest EV manufacturer.
This marks a striking reversal for an automaker whose ascent once seemed unstoppable—having overtaken traditional carmakers with far greater resources and helping Elon Musk become the world’s richest person. The sales decline occurred even amid President Donald Trump’s early last year when he held a press conference to hail Musk as a “patriot” in front of Teslas lined up on the White House driveway, then stated he would purchase one, breaking presidential tradition of not endorsing private company products.
Tesla’s fourth-quarter sales reached 418,227 units, missing even the significantly lowered 440,000 target that analysts surveyed recently by FactSet had forecast. Sales were severely impacted by the expiration of a $7,500 by the Trump administration at the end of September.
Tesla’s stock dropped 2.6% to $438.07 on Friday.
Despite multiple challenges facing the company, investors are wagering that Tesla CEO Elon Musk can fulfill his goals of making Tesla a leader in and getting consumers to adopt that can handle basic tasks in homes and offices. Reflecting this optimism, the stock ended 2025 with an approximate 11% gain.
The most recent quarter marked the first time Tesla sold stripped-down versions of the Model Y and Model 3—unveiled by Musk in early October as part of a push to boost sales. The new Model Y is priced just below $40,000, while the more affordable Model 3 is available for under $37,000. These variants are expected to help Tesla compete against Chinese models in Europe and Asia.
For fourth-quarter earnings set to be released in late January, analysts anticipate the company will report a 3% sales decline and a nearly 40% drop in earnings per share, per FactSet data. Analysts predict the downward trend in sales and profits will eventually reverse as 2026 progresses.
Musk stated earlier last year that a in sales was in progress, but investors remained unfazed when that failed to materialize, instead focusing on Musk’s shift to other areas of the business. He has repeatedly emphasized that the company’s future hinges on its driverless robotaxi service, energy storage division, and the creation of robots for homes and factories—with far less emphasis on car sales.
Tesla began launching its in Austin in June, initially equipping cars with safety monitors to take control in case of issues, then proceeding to test without those monitors. The company aims to expand the service to multiple cities this year.
To succeed in this, Tesla must compete with rival Waymo—which has operated autonomous taxis for years and boasts far more customers. It will also face regulatory hurdles. The company is currently under and other investigations. In California, Tesla risks temporarily losing its license to sell vehicles in the state after a judge there ruled it had regarding their safety.
“Regulatory matters will be a major issue,” noted Wedbush Securities analyst Dan Ives, a prominent bull on Tesla’s stock. “We’re dealing with people’s lives.”
Nonetheless, Ives stated he anticipates Tesla’s autonomous products will soon overcome any obstacles.
Musk has expressed hope that software updates to Tesla vehicles will allow hundreds of thousands of them to operate autonomously with no human input by the end of this year. The company also plans to start manufacturing its AI-powered with no steering wheel or pedals in 2026.
To keep Musk focused on Tesla, the company’s directors granted him a potentially massive at the annual shareholder meeting held in November.
Musk secured another massive windfall two weeks ago after the Delaware Supreme Court overturned a ruling that had stripped him of a $55 billion compensation package Tesla awarded him in 2018.
Musk may become the world’s first trillionaire later this year when he takes his rocket company public for the first time—an initial public offering analysts predict will be a blockbuster.
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AP video journalist Mustakim Hasnath contributed to this report from London.