China's BYD beats Tesla

Tesla ceded its crown as the world’s top electric vehicle maker to China’s BYD after annual sales fell for a second year, with intensifying competition, the expiration of U.S. tax credits and damage to the automaker’s brand hurting demand.

With global EV sales rising 28% last year, BYD outsold Tesla for the first time on an annual basis, helped by rapid growth in Europe where the Chinese automaker has been widening its lead over the U.S. rival.

The annual deliveries figure raises questions about whether Tesla can stabilize its core auto business following two consecutive years of sales declines, even as it pivots to futuristic projects such as robotics and self-driving cars to justify its steep valuation.

Tesla shares were marginally up in early trading.

“I think the market remains focused on the robotaxi business, where Tesla is testing its Cybercab in Austin,” said Seth Goldstein, senior equity research analyst at Morningstar.

“If deliveries can continue to not be down too much in the coming quarters, I expect market sentiment around the robotaxi will continue to drive the stock,” Goldstein added.

Tesla’s fourth-quarter figures come after third-quarter deliveries were supported by a rush to lock in U.S. EV tax credits before they expired at the end of September, followed by a sharper slowdown as incentives rolled off.

EV demand has softened in the U.S. since the end of September, when President Donald Trump’s administration ended $7,500 federal tax credits.

Tesla said it delivered 418,227 vehicles in the October–December quarter, down 15.6% from 495,570 a year earlier. Analysts expected 434,487 vehicles or a 12.3% drop, according to Visible Alpha.

For the full year, Tesla delivered 1.64 million vehicles, compared with 1.79 million in 2024. Analysts polled by Visible Alpha had expected deliveries of about 1.65 million vehicles, marking the company’s second consecutive annual decline.

INTENSIFYING COMPETITION IN NORTH AMERICA AND EUROPE

Analysts have said Tesla came under immense pressure in 2025 in North America and Europe, where competition intensified and the company faced brand backlash due to CEO Elon Musk’s political rhetoric.

Growing competition from Chinese firms and European automakers such as Volkswagen and BMW has weighed on Tesla’s sales momentum.

BYD said sales outside of China climbed to a record 1 million vehicles in 2025, up about 150% from 2024. The company has said it aimed to sell as many as 1.6 million vehicles outside China in 2026, though it has not disclosed an overall sales target.

Tesla in October launched stripped-down “Standard” versions of the Model Y and Model 3, priced about $5,000 below the previous base models, as it sought to defend sales volumes after the tax credit loss and appeal to customers in Europe looking for cheaper options.

The move disappointed some investors who had expected a larger price cut or a meaningfully new mass-market product.

Even as vehicle deliveries have weakened, Tesla shares rose about 11.4% in 2025, boosting Musk’s wealth.