Tesla’s car sales declined 16 percent in the last three months of 2025, the company said on Friday, a result of the elimination of tax credits that had encouraged Americans to buy electric vehicles.
Once the world’s biggest seller of electric vehicles, Tesla lost significant ground to other manufacturers. In 2025, for the first year ever, the company sold fewer electric cars than China’s leading automaker, BYD.
Tesla remains the largest American maker of electric vehicles, but its slumping sales suggest that a wider slowdown is in store in the United States for a technology seen as an important tool against climate change and urban air pollution.
President Trump and Republicans in Congress last year eliminated tax credits of up to $7,500 for people who bought or leased electric vehicles. Last month, the Trump administration began an effort to gut clean air regulations that have pushed automakers to produce more battery-powered models.
The 180-degree shift in federal policy has had a particularly strong impact on Tesla, which accounts for 45 percent of the U.S. electric vehicle market and has been the biggest beneficiary of federal policies supporting those cars.
Tesla’s chief executive, Elon Musk, was one of Mr. Trump’s biggest supporters during the 2024 presidential election, but that did not restrain Republicans from favoring the fossil fuel industry after they regained control of Congress and the White House.
The carmaker said Friday that it delivered 1.6 million cars worldwide during all of 2025, down from almost 1.8 million in 2024. Deliveries in the fourth quarter, which were hit the hardest by the end of tax credits at the end of September, fell to 418,000 from 496,000 a year earlier.
Wall Street analysts had expected Tesla to report deliveries of 1.64 million cars for the year and 423,000 for the quarter, according to the average of estimates from 20 investment firms compiled by the carmaker.
On Thursday, BYD said it sold 2.3 million electric cars globally last year, up 28 percent from 2024. A growing proportion of those sales took place outside China, primarily in Asia, Europe and Latin America. Chinese electric cars are effectively barred from the United States by high tariffs.
Industry analysts expect U.S. electric vehicle sales for all manufacturers to be tepid in 2026. But they also expect sales to pick up again in 2027 when automakers begin offering more electric vehicles for $30,000 or less, including a midsize Ford pickup. Many electric vehicles available now are too expensive for many car buyers.
“Once those come to market, I think you’ll see the market start to grow,” said Kevin Roberts, director of economic and market intelligence at CarGurus, an online car shopping site. “But,” he added, “2026 could be a tough year.”
Part of Tesla’s decline in the fourth quarter reflected a rush by American electric car buyers in the previous quarter to take advantage of the tax credit before it expired. Sales of all electric vehicle brands in November, the second month without incentives, plunged more than 40 percent from a year earlier, according to Cox Automotive.
The demise of incentives has already prompted carmakers to cut prices, expanding the number electric vehicles that can be had for less than $40,000. Examples include the Chevrolet Equinox EV, the Hyundai Ioniq 5 and the Nissan Leaf.
In October, Tesla began selling a stripped-down version of its Model 3 sedan for $37,000. The car uses cheaper interior materials, lacks an FM radio and cannot travel as far on a charge as versions selling for $42,500 or more.
Prices of electric vehicles are expected to fall more over time, eventually becoming less expensive than comparable gasoline models. Batteries are becoming cheaper while offering faster charging times and greater driving range.
“The economics will eventually be there with battery prices going down,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive.
Ms. Valdez Streaty, who specializes in electric vehicles, expects them to account for 8.5 percent of the U.S. new car market in 2026, rebounding from 5.4 percent in November. She expects their market share to reach 17 percent or more by 2030.
Growth will be fastest in states that offer residents incentives to buy battery-powered vehicles, like California, Colorado and New York. And the charging network will expand despite lackluster federal support, Ms. Valdez Streaty said, with more chargers added to apartment complexes and workplaces, making it easier for renters and other people who cannot charge vehicles at home.
Sales of hybrid vehicles continue to grow strongly, a sign that buyers are interested in electric transportation but worried about charging. Hybrids have internal combustion engines and electric motors and can travel short distances on battery power. They are typically less expensive than new E.V.s and only modestly more expensive than cars that run solely on fossil fuels.
There is also strong demand for used electric vehicles, which are often as affordable as comparable gasoline cars.
“Used E.V.s are some of the best deals out there,” Mr. Roberts of CarGurus said.
The decline in Tesla sales is not just the result of shifting U.S. policy. The company’s car sales peaked in 2023, when it delivered 1.8 million vehicles, even though total sales of electric vehicles have grown rapidly over the last two years in most countries, especially in Asia and Europe.
In addition to BYD and other Chinese automakers, Tesla is also losing ground to established automakers. In Europe, Tesla now sells fewer electric cars than Volkswagen.
Tesla vehicles also appear increasingly dated. The company has not made substantial updates to its best-selling model, the Model Y sport utility vehicle, which first went on sale in 2020. The only new model that Tesla has introduced since then is the Cybertruck, which has sold poorly.
“Since they haven’t had any new products, their share has dwindled,” Ms. Valdez Streaty said.
Tesla’s sales have also been hurt by Mr. Musk’s public support for right-wing causes. He has been less strident recently, and spends less time in Washington than in the early months of the second Trump administration. But Mr. Musk continues to put off many liberals, the biggest buyers of electric vehicles, particularly in Germany and France, where Tesla sales plummeted after he endorsed far-right politicians.
Wall Street has largely shrugged off Tesla’s flagging car sales. The company’s stock has been trading near record levels because investors believe that Tesla will dominate the emerging market for self-driving taxis. Tesla’s Robotaxi service operates in Austin, Texas, and San Francisco, but the cars have human monitors inside who can intervene if there are problems.
Waymo, a division of Alphabet, Google’s parent company, has about 2,500 autonomous taxis without human monitors in Austin, San Francisco and three other cities and plans to expand to 20 more in 2026.
Jack Ewing covers the auto industry for The Times, with an emphasis on electric vehicles.
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