In a significant shift for the global automotive industry, Tesla Inc. has relinquished its title as the world's leading electric vehicle manufacturer. The American pioneer was overtaken by Chinese rival BYD after reporting a second consecutive annual decline in vehicle deliveries for 2025, a downturn attributed to fierce competition and softening demand in crucial markets.
The Numbers Behind the Fall from the Top
Tesla disclosed that it delivered 1.64 million vehicles globally in 2025, marking a 9 per cent decrease from its previous year's performance. This decline paved the way for BYD, which solidified its dominance by selling a formidable 2.26 million electric vehicles in the same period. The fourth quarter proved particularly challenging for Tesla, with deliveries reaching 418,227 units, falling short of the 440,000 units anticipated by analysts surveyed by FactSet.
A key factor impacting the quarter's sales was the expiration of a significant incentive for American buyers. The $7,500 US federal tax credit, a major purchase driver, was phased out by the Trump administration at the end of September 2025, removing a critical financial cushion for potential customers.
Investor Sentiment and Musk's Strategic Pivot
Despite the immediate sales pressure, Tesla's stock showed resilience, closing 2025 with an approximate 11 per cent gain. Investors appear to be focusing on Chief Executive Elon Musk's ambitious long-term vision rather than near-term delivery volatility. Musk is aggressively steering Tesla towards becoming a leader in autonomous mobility and robotics, repeatedly stating that the company's future growth will be anchored by robotaxi services, energy storage solutions, and humanoid robots for domestic and industrial use.
This strategic shift received a notable endorsement from shareholders in November 2025, when they approved a potentially massive new compensation package for Musk. Furthermore, the Delaware Supreme Court recently reversed a prior ruling, reinstating a colossal $55 billion pay package awarded to Musk in 2018, bolstering his position as the world's wealthiest individual.
New Models and Financial Forecast
In a bid to rejuvenate demand, Tesla launched more affordable versions of its popular Model Y and Model 3 in early October 2025. The fourth quarter represented the first full sales period for these stripped-down variants, with the new Model Y priced just under $40,000 and the cheaper Model 3 starting below $37,000. These competitively priced models are central to Tesla's strategy for countering the intense rivalry from Chinese EV manufacturers in markets like Europe and Asia.
Looking at the immediate financial horizon, analysts anticipate continued strain. For the fourth-quarter results scheduled for late January, forecasts from FactSet point to a 3 per cent drop in revenue and a steep nearly 40 per cent fall in earnings per share. However, the consensus view suggests that sales and profitability should begin to stabilise and recover as 2026 unfolds, supported by the new product strategy and Musk's technological bets.
