Tesla Sales Drop for Second Consecutive Year

Tesla has recorded its second consecutive year of declining sales, signaling a challenging period for the electric vehicle pioneer. The company's latest quarterly report revealed that deliveries fell significantly short of analyst projections, continuing a downward trend that began in the previous year.

While the company struggles with vehicle deliveries, investor sentiment remains surprisingly positive. Tesla shares have reached record highs recently, driven largely by enthusiasm for the company's future technology rather than its current sales figures. The divergence between stock performance and actual vehicle sales highlights the complex market dynamics facing the automaker.

Tesla announced on Friday that it sold 418,227 electric vehicles in the fourth quarter of 2025. This represents a 15.6% decrease compared to the same period in 2024. The results fell below Wall Street expectations, which were centered around 441,000 vehicles according to data compiled by Bloomberg. Tesla had previously released its own consensus forecast of 422,850 units, which was considered more pessimistic than general market estimates.

For the entire year, Tesla delivered approximately 1.64 million vehicles. This figure marks the company's second straight year of declining sales, following its first-ever annual drop in 2024 after years of rapid expansion. The slump in November was particularly severe, with sales hitting their lowest level since 2022. This occurred despite Tesla introducing cheaper versions of its popular Model 3 and Model Y vehicles the previous month.

The landscape of the electric vehicle market is shifting as Chinese manufacturers gain ground. BYD, Tesla's primary Chinese rival, announced on Thursday that its sales of battery-powered cars rose nearly 28% to 2.26 million units in 2025. This surge allowed BYD to surpass Tesla in annual sales of battery-electric vehicles for the first time in history.

The competitive pressure is not limited to global sales figures. In Tesla's second-largest market, China, the company faces intense competition from local manufacturers. These rivals are offering high-tech electric models at significantly lower prices, challenging Tesla's market dominance in the region.

Several factors have contributed to the recent sales decline. The expiration of a $7,500 tax credit for new EVs in September had a significant impact. The looming deadline spurred a rush of purchases in the preceding months, driving record sales for Tesla and other automakers. However, once the credit ended, EV sales dropped across the board, affecting competitors like Ford, Hyundai, and Kia as well.

Tesla is also facing specific headwinds in Europe. Sales have plummeted in key markets, with national auto association data showing December registrations dropping 66% year-over-year in France and 44% in Spain. This decline has been attributed to a backlash against CEO Elon Musk's endorsement of the far-right German political party AfD. Additionally, analysts note that Tesla is suffering from a stale product lineup, having not launched a new vehicle since the Cybertruck in 2023, which has itself been a sales disappointment.

Despite these operational struggles, Tesla's stock price hit a record high in December. Investors are expressing strong optimism regarding the automaker's robotaxi rollout. Tesla launched a robotaxi service in Austin in June and has ambitious plans to expand autonomous ride-hailing to multiple US cities this year.

Elon Musk has emphasized that the company's future lies in its robotaxi and Optimus robot initiatives. The company is preparing to begin mass production in April of its Cybercab robotaxi, a vehicle designed without a steering wheel or pedals. In an October earnings call, Musk suggested that the launch of 'unsupervised' Full Self-Driving software would boost vehicle demand. He also claimed that the Austin robotaxi service would operate without safety monitors by the end of 2025, though reports indicate that as of late December, safety drivers were still present in vehicles available to the public.