In a significant shift for the global automotive industry, Tesla has been unseated as the world's leading electric vehicle manufacturer. The change was confirmed on Friday, 2 January 2026, as the company reported a second consecutive annual decline in deliveries.
A Crown Relinquished Amid Falling Sales
The data revealed a clear picture of Tesla's challenges. The company delivered 1.64 million vehicles in 2025, representing a 9% drop compared to the previous year. This downward trend was also evident in the final quarter, where sales of 418,227 vehicles fell short of analyst expectations of 440,000.
This performance paved the way for Chinese automotive giant BYD to ascend to the number one position. BYD solidified its lead by selling a formidable 2.26 million electric vehicles throughout the last year, decisively outpacing its American rival.
Factors Behind the Tesla Slowdown
Analysts point to a confluence of issues that have buffeted Tesla. A notable factor is reported customer dissatisfaction linked to the right-wing political commentary of CEO Elon Musk, which has sparked a backlash among some buyers. Furthermore, the company is facing intensifying competition from overseas, particularly from well-established Chinese manufacturers like BYD.
The sales figures for the fourth quarter were also likely impacted by the expiration of a key US consumer incentive. A substantial $7,500 federal tax credit was phased out by the Trump administration at the end of September 2025, removing a significant purchase motivator for potential customers.
Investor Hopes Rest on Future Tech
Despite these headwinds, Tesla's stock market performance told a different story in 2025. Shares closed the year with an approximate gain of 11%, and even rose almost 2% in pre-market trading following the sales announcement. This resilience appears to be fuelled by investor confidence in Musk's long-term vision for the company beyond car manufacturing.
Many shareholders are betting that Musk can deliver on ambitious plans to transform Tesla into a leader in robotaxi services and popularise humanoid robots for domestic and office tasks. The market's faith seems to be placed in these futuristic ventures as the new engine for growth, even as its core EV business faces stiff challenges.
