Tesla's annual vehicle deliveries declined by 9% in 2025, totaling 1.63 million units compared to 1.79 million the previous year, according to figures released by the company. This marks the second consecutive year of declining annual sales for the electric vehicle manufacturer. The drop was attributed to the removal of the federal tax credit in the U.S. and increasing competition from Chinese automakers, particularly BYD.

The company also reported a significant decrease in fourth-quarter sales, with 418,227 vehicles delivered, a 15.6% drop from the same period last year. This figure fell short of analysts' expectations, contributing to a more than 2% drop in Tesla stock as the market opened after the New Year holiday. Approximately 50,850 of the total vehicles delivered in 2025 were classified as "other models," encompassing the Cybertruck, Model X, and Model S.

BYD, the Chinese electric vehicle manufacturer, delivered 2.26 million EVs in 2025, surpassing Tesla to become the global EV sales leader. Tesla's market share has been eroded in both Europe and China due to the rise of these Chinese competitors. While Tesla faces increased competition in the United States, it is not from Chinese automakers, which are currently barred from selling vehicles in the country.

Industry analysts suggest that the elimination of the $7,500 U.S. federal tax incentive had a significant negative impact on Tesla's fourth-quarter sales. The tax credit previously provided a substantial price advantage for Tesla vehicles, making them more competitive in the market.

Tesla has not yet released a statement addressing the sales decline or its strategy for regaining market share. The company is expected to announce its next steps during its upcoming earnings call. The focus will likely be on strategies to boost production and sales of the Cybertruck, as well as potential price adjustments to remain competitive in key markets.