In a landmark shift for the global automotive industry, China's BYD Co. has achieved its full-year sales target for 2025 and is poised to overtake Tesla Inc. as the world's largest producer of electric vehicles. This historic achievement comes amidst a challenging forecast for China's auto sector in the year ahead.
A New Champion in the Global EV Race
The Shenzhen-based automotive giant delivered a total of 4.6 million vehicles in 2025, marking a 7.7% increase from its 2024 figures. This performance aligned perfectly with a revised annual goal the company set in September. Notably, BYD's sales mix included nearly equal numbers of fully electric vehicles and plug-in hybrid models, showcasing its diversified strategy.
In contrast, Tesla is expected to report a delivery of approximately 440,900 vehicles for the fourth quarter of 2025, an 11% decline from the same period a year earlier, according to Bloomberg data. This would result in annual sales of around 1.6 million units for Tesla, representing its second consecutive yearly drop. BYD's Hong Kong-listed shares celebrated the milestone, climbing by as much as 2.3% on the first trading day of the new year.
Navigating Domestic Headwinds and Global Ambitions
Despite claiming the top spot, BYD and its rivals face mounting pressure. The Chinese government is scaling back some incentives that previously supported EV purchases, and an influx of new models from competitors like Geely and Xiaomi is intensifying domestic competition. BYD's passenger EV and hybrid sales in its home market fell for the eighth straight month in December 2025, slumping by 37.7%.
CEO Wang Chuanfu acknowledged at an investor meeting in early December that the company's technological headstart had diminished, affecting domestic sales. However, he expressed confidence in BYD's 120,000-strong engineering team to deliver new breakthroughs and regain competitive advantages.
The bright spot for BYD has been its explosive overseas growth. Deliveries outside China soared to 1.05 million units in 2025, surpassing even the highest estimates and helping offset the decline at home. The company has set an ambitious goal to expand overseas sales to between 1.5 million and 1.6 million units in 2026, according to a Citigroup report.
Future Outlook and Industry Consolidation
The road ahead is not without obstacles. BYD has posted consecutive quarterly profit declines and is under scrutiny as part of China's efforts to control aggressive price discounting in the sector. This growing regulatory pressure is expected to accelerate industry consolidation.
Analysts remain cautiously optimistic about BYD's resilience. Bloomberg-compiled estimates suggest the company's total sales could grow to 5.3 million units in 2026. Morgan Stanley anticipates a more meaningful domestic recovery after BYD launches several major model facelifts in early 2026. Deutsche Bank analysts also expect new product launches and a fresh technology platform to boost competitiveness.
This potential recovery could allow BYD to widen its lead over Tesla, which faces its own challenges. The US automaker dealt with a sharp sales drop in early 2025 as it revamped production lines for the updated Model Y. CEO Elon Musk's controversial political involvement and the end of US federal EV purchase subsidies are also seen as factors weighing on future demand.
The EV crown has changed hands, marking a pivotal moment where Chinese innovation and scale have reshaped the global automotive hierarchy. All eyes are now on how BYD will defend its new title in an increasingly fierce and complex market.
