What's happened
As of early January 2026, Tesla's 2025 vehicle deliveries fell 9% to 1.64 million, overtaken by China's BYD, which sold 2.26 million EVs. Tesla's sales decline is linked to the expiration of US EV tax credits and political controversies involving CEO Elon Musk. Despite setbacks, Tesla's stock rose 11% in 2025 amid optimism about future tech ventures.
What's behind the headline?
Market Shift and Competitive Pressure
Tesla's loss of the global EV sales lead to BYD marks a significant shift in the electric vehicle industry, highlighting China's growing dominance in this sector. BYD's 28% sales increase contrasts sharply with Tesla's 9% decline, underscoring the impact of competitive pricing and aggressive expansion in China and abroad.
Political and Regulatory Impact
The expiration of the US federal EV tax credit in September 2025, coupled with the Trump administration's anti-EV stance, directly contributed to Tesla's sales slump. Musk's political alignment with Trump and leadership of the controversial DOGE panel led to protests and brand damage, particularly in the US and Europe.
Strategic Responses and Future Outlook
Tesla's introduction of lower-cost Model Y and Model 3 variants aims to counter cheaper Chinese imports in Europe and Asia, signaling a strategic pivot to regain market share. Musk's ambitious plans for robotaxi services and humanoid robots maintain investor confidence, reflected in Tesla's 11-16% stock gains despite sales declines.
Broader Implications
This transition signals a maturing EV market where innovation alone is insufficient without competitive pricing and favorable policy environments. Tesla's challenges illustrate the risks of political entanglements for global brands. The coming year will test Tesla's ability to adapt amid intensifying global competition and shifting regulatory landscapes.
What the papers say
According to Jasper Jolly in The Guardian, "China’s BYD overtook Tesla as the world’s largest electric carmaker in 2025," emphasizing BYD's 2.26 million EV sales compared to Tesla's 1.63 million. Jolly highlights the symbolic nature of this shift in global automotive dominance. Jack Ewing of The New York Times notes that Tesla "lost significant ground to other manufacturers" and points to the Trump administration's elimination of EV tax credits as a key factor.
The New York Post details Tesla's 16% drop in Q4 deliveries and the impact of Musk's political controversies, including protests and vandalism at Tesla showrooms. It also notes Tesla's strategic launch of cheaper vehicle models to compete with Chinese rivals. Al Jazeera and Sky News both report Tesla's 9% sales decline and the expiration of the $7,500 tax credit, with Sky News adding that analysts expect sales and earnings to eventually rebound in 2026.
The Independent and AP News echo these points, noting Tesla's stock gains despite sales challenges and investor optimism about Musk's futuristic ambitions. These sources collectively paint a picture of a company facing immediate sales pressures but maintaining long-term investor confidence due to innovation and leadership in emerging technologies.
How we got here
Tesla led the electric vehicle market for years but faced growing competition, especially from Chinese automaker BYD. US policy shifts, including the Trump administration's removal of a $7,500 EV tax credit and regulatory rollbacks, have challenged Tesla's sales. Musk's political involvement and controversial endorsements have also affected the brand's perception.
Go deeper
- Why did Tesla's sales decline in 2025?
- How did BYD overtake Tesla in EV sales?
- What impact did US policy changes have on Tesla?
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Elon Reeve Musk FRS is an engineer, industrial designer, technology entrepreneur and philanthropist. He is the founder, CEO, CTO and chief designer of SpaceX; early investor, CEO and product architect of Tesla, Inc.; founder of The Boring Company; co-foun
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