Tesla cedes EV crown to BYD after sales drop

Tesla has lost its position as the world’s largest electric vehicle (EV) manufacturer to Chinese automotive giant BYD, after reporting an 8% decline in annual sales for 2025.

The American company delivered 418,227 vehicles in the final quarter of 2025, bringing its full-year total to 1.64 million EVs. This marked a significant drop from 2024 levels, falling short of analyst expectations.

BYD reported sales of 2.26 million EVs in 2025, claiming the global leadership position that Tesla had narrowly held in 2024 with 1.79 million deliveries compared to BYD’s 1.76 million.

Analysts had expected Tesla’s fourth-quarter deliveries to reach 449,000 units according to FactSet consensus, making the actual result a notable disappointment for investors. Tesla shares closed 2.6% down in New York following the announcement.

Multiple headwinds hit Tesla demand

The sales decline comes after the elimination of a US$7500 tax credit in the United States at the end of September 2025, which industry observers say will take time for EV demand to rebalance around.

Tesla has also faced challenges from CEO Elon Musk’s political support of US President Donald Trump and other right-wing politicians, which has weighed on demand in key markets throughout 2025.

Rising competition from BYD and other Chinese manufacturers, as well as European automotive giants, has added further pressure on Tesla’s market position.

BYD’s rapid ascent

Shenzhen-based BYD, which also produces hybrid vehicles, unveiled its record EV sales figures on Thursday. The company, known as “Biyadi” in Chinese or by its English slogan “Build Your Dreams,” was founded in 1995 and originally specialised in battery manufacturing.

BYD has come to dominate China’s highly competitive market for new energy vehicles – a term covering everything from fully electric vehicles to plug-in hybrids. China represents the world’s largest market for new energy vehicles.

The company is now expanding its overseas presence as increasingly price-conscious consumption patterns in China weigh on profitability. While BYD faces hefty tariffs in the US market, the company has found success in Southeast Asia, the Middle East, and Europe.

Analyst outlook remains cautious

Wedbush Securities analysts noted that Tesla’s quarterly sales figure remained better than some had speculated, but flagged ongoing challenges.

“Tesla faces a more difficult demand environment following the end of the EV tax credit while Europe remains a headwind to its deliveries,” the analysts said.

The company still faces challenges obtaining regulatory approval in Europe relating to self-driving technology, with sales potentially rebounding once these regulatory hurdles are cleared.

“Sales around smaller and emerging markets have started to see larger growth metrics than expectations, which look to offset the declines in key regions like China and Europe,” Wedbush analysts added.

The shift in global EV leadership comes as both Tesla and BYD have established growing presences in New Zealand, with Tesla operating directly and BYD distributed locally through Ateco Automotive. The changing competitive dynamics could influence pricing and model availability for New Zealand EV buyers in the coming year.