Tesla’s yearly sales have declined for the second consecutive year, driven by the withdrawal of the federal tax incentive in the U.S. and increased competition from Chinese manufacturers.

In 2025, Tesla delivered 1.63 million vehicles worldwide, reflecting a 9% decrease from 1.79 million in 2024, based on data released by the company. Significantly, around 50,850 of these vehicles fall under the category of “other models,” which includes the Cybertruck along with the older Model X and Model S.

Tesla documented fourth-quarter sales of 418,227, marking a 15.6% decline from the same quarter last year and surpassing analysts’ expectations significantly. Following the New Year holiday, Tesla’s stock fell more than 2% as the market opened.

Once the forefront of global EV sales, Tesla has faced a decrease in market share in Europe and China due to the ascent of Chinese rivals. China’s BYD, which sold 2.26 million EVs in 2025, has now secured the top position in global EV sales. Additionally, Tesla is encountering growing competition in the U.S., although interestingly, not from Chinese automakers that are restricted from selling vehicles in the region.

However, the removal of the $7,500 U.S. federal tax incentive appears to have inflicted the most significant damage in the fourth quarter. In the third quarter, Tesla achieved a record 497,099 vehicle sales—a 29% rise from the previous quarter—as customers hurried to purchase EVs before the federal EV tax credit was eliminated. Since then, sales have declined despite attempts to attract buyers.

Tesla’s drop in sales occurs as CEO Elon Musk seeks to shift the company’s focus from producing and selling EVs to exploring AI and robotics. Musk’s vision suggests profitability can be found in “sustainable abundance,” a phrase used throughout the company’s recent Master Plan IV, which describes a framework of sustainable products, spanning transport, energy generation, battery storage, and robotics.

Nevertheless, the majority of Tesla’s revenue still stems from its EV sector. For instance, Tesla reported $28 billion in revenue for the third quarter, with $21.2 billion originating from EV sales.