Tesla's annual vehicle deliveries declined for the second consecutive year, falling 9% to 1.63 million units in 2025, according to figures released by the company, a drop fueled by the removal of the federal tax credit in the U.S. and increased competition from Chinese automakers. This decline allowed China's BYD to overtake Tesla as the global leader in electric vehicle sales, with BYD delivering 2.26 million EVs in 2025.

The company reported fourth-quarter sales of 418,227 vehicles, a 15.6% decrease compared to the same period last year, a figure that significantly underperformed analysts' expectations. Approximately 50,850 of the delivered vehicles were categorized as "other models," encompassing the Cybertruck, Model X, and Model S. Following the New Year holiday, Tesla stock experienced a drop of more than 2% as the market opened.

Tesla, which once dominated the global EV market, has experienced a reduction in market share in both Europe and China due to the growing presence of Chinese competitors. While Chinese automakers are currently barred from selling vehicles in the United States, Tesla faces increasing competition from other EV manufacturers within the country.

Industry analysts suggest that the elimination of the $7,500 U.S. federal tax incentive for Tesla vehicles had a significant negative impact on sales, particularly in the fourth quarter. The tax credit, designed to encourage the adoption of electric vehicles, was removed as Tesla reached the sales volume threshold stipulated in the legislation.

The company has not yet released a statement regarding its plans to regain market share or address the challenges posed by increased competition and the absence of the federal tax credit. Investors and industry observers are closely watching Tesla's upcoming announcements for insights into the company's strategy for navigating the evolving EV landscape.