Tesla has ceded its position as the world’s largest electric vehicle maker to China’s BYD after annual sales fell for a second consecutive year, reflecting pressure from rising competition, the end of U.S. tax incentives and growing brand challenges.
Global electric vehicle sales rose 28 percent last year, but Tesla’s deliveries declined about 8.6 percent in 2025. In contrast, BYD overtook the U.S. automaker on an annual basis for the first time, driven by rapid growth outside China, particularly in Europe, where the Chinese company has steadily widened its lead.
BYD expands aggressively outside China
BYD said its electric vehicle sales outside China climbed to a record 1 million units in 2025, up roughly 150 percent from 2024. The company has indicated it is targeting overseas sales of up to 1.6 million vehicles in 2026, highlighting its aggressive global expansion strategy, Reuters news report said.
Strong performance in Europe has been a key factor in BYD’s rise, as it capitalizes on competitive pricing, a broad model lineup and expanding distribution across the region.
Tesla sales slide amid tax credit loss and competition
Tesla’s challenges have been most visible in the United States and Europe. The expiration of the 7,500 dollar U.S. federal EV tax credit in September weighed heavily on demand, following a third-quarter rush by buyers seeking to lock in the incentive before it ended.
In the October to December quarter, Tesla delivered 418,227 vehicles, down 15.6 percent from 495,570 a year earlier.
For the full year, Tesla delivered 1.64 million vehicles, compared with 1.79 million in 2024.
In the U.S., electric vehicles accounted for 6.2 percent of retail vehicle sales during the quarter, down 3.6 percentage points from a year earlier. Average transaction prices rose nearly 6,000 dollars to 53,300 dollars, according to J.D. Power, further pressuring demand.
Rising pressure in Europe and North America
Competition from Chinese and European automakers including BYD, Volkswagen and BMW has weighed on Tesla’s momentum. Tesla registrations declined across much of Europe in December, although Norway stood out with record sales. Despite that outlier, Tesla’s market share shrank across most of the region in 2025.
To defend volumes, Tesla introduced lower-priced Standard versions of the Model Y and Model 3 in October, priced about 5,000 dollars below previous base models. The move was aimed at offsetting the loss of tax credits and appealing to more price-sensitive buyers, particularly in Europe.
Energy business offers a bright spot
Despite weaker vehicle deliveries, Tesla reported a record deployment of 14.2 gigawatt hours of energy storage products, providing a bright spot amid the automotive slowdown. The company is scheduled to report its fourth-quarter financial results on January 28.
BABURAJAN KIZHAKEDATH
