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Tesla has lost its position as the world’s top electric vehicle (EV) seller to China’s BYD, marking a significant shift in the EV market. After dominating the market for years and helping to popularize electric cars, Tesla now faces challenges. In the final quarter of 2025, the company reported a 16% decline in deliveries, falling short of analysts’ expectations. For the year, Tesla’s total sales dropped by nearly 9%, marking its second consecutive annual decline.
Meanwhile, BYD has seen substantial growth, posting higher sales in both the fourth quarter and for the year overall. BYD delivered nearly 2.26 million EVs in 2025, surpassing Tesla’s 1.64 million deliveries.
Despite this shift, investors have shown little concern about Tesla’s slipping position in the global EV rankings. CEO Elon Musk has increasingly focused on other ventures, particularly artificial intelligence, autonomous vehicles, and humanoid robots, which have drawn attention away from Tesla’s core business of electric cars. Musk’s efforts to launch a robotaxi service have become a significant focal point, and the success of these projects will be critical for Tesla in 2026, especially considering the current outlook for EV demand in the U.S., Tesla’s largest market.
The U.S. government, under the administration of President Donald Trump, has removed federal incentives for electric vehicle purchases and weakened fuel economy and emissions regulations. These changes have cost Tesla billions in revenue from credits and regulations that once supported the company’s growth.
An analyst from William Blair, Jed Dorsheimer, noted that while many had expected a “hangover” after the end of tax credits for EV buyers, Tesla’s stock is now largely valued based on the company’s transformation into an AI and robotics leader, rather than its EV sales.
Tesla’s stock fell by 2.8% as of Friday afternoon in New York. Though Tesla’s shares rose by 11% in 2025, much of that growth has evaporated after the stock peaked in mid-December.
BYD Pulls Ahead of Tesla
In 2025, BYD surpassed Tesla, coming close to overtaking the company in 2024. While Tesla maintained a slim lead on an annual basis in 2024, BYD outpaced Tesla in the fourth quarter. BYD has seen strong growth, particularly in China, where its vehicles are priced significantly lower than Tesla’s entry-level Model 3. The company has also seen a surge in Europe, where Tesla’s sales have been in decline.
In 2025, BYD registered more EVs than Tesla in Germany and the UK — two of Europe’s largest EV markets. In contrast, Tesla’s sales in Europe fell by 28% over the first 11 months of the year, and the company experienced significant drops in France, Spain, and Sweden in December.
The outlook for Tesla in 2026 is growing increasingly uncertain, with analysts reducing their sales forecasts dramatically. Just two years ago, many predicted Tesla would sell over 3 million vehicles in 2026. Now, the average estimate for 2026 stands at around 1.8 million vehicles.
Tesla’s Energy Storage Business Thrives
While Tesla’s EV sales are down, its energy storage business has experienced significant growth. In the last quarter of 2025, Tesla deployed 14.2 gigawatt hours of energy storage products, up from 11 gigawatt hours in the same period the previous year. For the entire year, deployments grew by nearly 50%, reaching 46.7 gigawatt hours.
This growth in energy storage is attributed to rising demand driven by artificial intelligence (AI), which is increasing the need for power to support data centers and stabilize the power grid. Analysts are optimistic about Tesla’s energy storage business, which has become a key growth area for the company.
Cybercab and Driverless Cars: Tesla’s Bold Vision for the Future
At the end of 2025, Tesla generated excitement with its announcement of the Cybercab, a compact two-seat car with butterfly doors. Prototypes of the car have been shown without a steering wheel or pedals, but Tesla’s board chair, Robyn Denholm, stated that the car will be sold with those components if required by regulators.
Tesla has also begun testing autonomous driving with Model Ys in Austin, Texas, but so far, consumers can only use driverless rides in limited areas of the city, with safety supervisors still required in the front seats of the vehicles.
Despite the challenges, Musk remains optimistic about the future. “Great work by @Tesla team in 2025,” he wrote recently on X. “2026 will be epic!”
