Tesla on Friday reported a second straight annual drop in electric vehicle sales, as the phaseout of a $7,500 federal EV tax credit and mounting competition weighed on demand. With the decline, Tesla lost its title as the world’s bestselling electric vehicle maker. 

The company said it delivered 1.64 million vehicles in 2025, down 9% from 1.79 million in 2024. Sales also declined in the fourth quarter, tumbling 15.6% to 418,227 vehicles, short of the 440,000 that analysts polled by FactSet expected.

China’s BYD, which sold 2.26 million vehicles last year, is now the world’s biggest EV maker.

Tesla has struggled amid heightened competition from rival automakers, as well as a backlash from some consumers over CEO Elon Musk’s involvement with the Trump administration. Musk had headed up the Department of Government Efficiency, or DOGE, where he oversaw cuts to the government workforce and some funding programs before stepping back in May to refocus on Tesla.

At the same time, the expiration last fall of the $7,500 EV tax credit likely hurt demand as it removed an incentive that had enticed some consumers to buy or lease electric vehicles, which tend to be pricier than gas-powered cars.

Despite such challenges, Tesla’s stock finished 2025 with a gain of roughly 11%, as investors hope Musk can deliver on his ambitions to make the company a leader in robotaxi service and get consumers to embrace humanoid robots that can perform basic tasks in homes and offices.