Tesla's electric vehicle sales declined in 2025, allowing China's BYD to surpass it as the world's leading seller of electric cars. The company's car sales decreased by 16 percent in the last three months of 2025, according to a statement released Friday, and its sales for the full year declined by 9 percent. This marks the first year BYD has outsold Tesla in electric vehicle sales.

The sales figures highlight Tesla's shift away from its previous ambition of becoming the world's largest carmaker. The company had once aimed to sell 20 million cars annually by 2030, a figure roughly double Toyota's current sales volume. Tesla's Chief Executive Elon Musk has instead focused on developing self-driving cars and humanoid robots, technologies that currently generate limited revenue and face significant competition.

A key factor contributing to Tesla's sales decline was the elimination of federal tax credits for electric vehicle purchases, a policy enacted by Congress and then-President Trump. These tax credits had previously incentivized American consumers to purchase electric vehicles, including Teslas. The removal of these incentives made Tesla vehicles relatively more expensive compared to competitors, impacting sales volume.

Despite the decline, Tesla remains the largest American manufacturer of electric vehicles. However, the company's slumping sales suggest a potential slowdown in the broader adoption of electric vehicles in the United States. Electric vehicles are widely considered an important tool in combating climate change.

While Tesla's sales have decreased, other automakers have experienced gains in the electric vehicle market. This indicates a growing demand for electric vehicles overall, but also increasing competition within the sector. The future success of Tesla will likely depend on its ability to innovate and compete in this evolving market, particularly in the areas of self-driving technology and robotics.