Tesla’s slide from the top of the electric-vehicle heap didn’t happen overnight. In 2025 the company reported roughly 1.63 million vehicle deliveries — a huge number by any normal measure, but not enough to hold the crown. China’s BYD scaled past Tesla on volume, and for the first time in its history Tesla’s deliveries have declined for two consecutive years.
The arithmetic is simple but telling. Tesla peaked at about 1.85 million vehicles in 2023, then fell back in 2024 and again in 2025. CEO Elon Musk compounded the narrative earlier this week with a tweet claiming Tesla is making “~2M cars/year and rising.” That phrasing neatly sums up the disconnect: production and deliveries are down, not up, and the tilde here isn’t covering a 300–400k-unit shortfall.
What’s behind the drop
There’s no single culprit. Automotive markets are always a tangle of product timing, pricing, incentives and competition — and for Tesla, several of those strands unraveled at once.
- Product refreshes that didn’t spark a rebound. New or updated models such as the Model 3 Highland and the Model Y Juniper were meant to reinvigorate demand. They helped, but not enough to reverse the trend. The Model Y — once the world’s best-selling car — lost that title and struggled to regain it.
- The Cybertruck didn’t scale as hoped. Launch excitement translated into headlines and reservation numbers, but commercial uptake has been softer than the company and many observers expected. Low unit sales there blunt the impact of a high-profile product.
- A manufacturing hangover. Analysts and inside accounts point to execution and capacity issues that have left Tesla with momentum problems rather than pipeline limitations. That partly explains why Musk and the company are increasingly talking about robotics and AI as alternative growth engines rather than leaning only on pure vehicle volume.
- Competitive pressure from BYD and others. China’s automakers kept pushing on price, variety and local EV supply chains. BYD’s scale and aggressive expansion overseas meant it could claim top global deliveries even as Tesla’s numbers slipped.
Reputation, politics and the demand equation
Publicity and politics matter to consumer brands — especially one as visible as Tesla. Over the past two years Musk’s highly public political positioning and controversies have provoked protests, turned off some customers and created PR headwinds. Some reporting suggests the company has taken measurable financial hits linked to that environment, with analysts pointing to demand softness in certain markets.
Whether and how much politics versus product or price drove buyers away is a matter of debate, but the effect is real: buyers can postpone or cancel large discretionary purchases like cars when they feel uncertain about brand alignment, incentives or future resale value.
From cars to robots: a strategic detour
Faced with a falling share of a growing EV pie, Tesla is leaning harder into other narratives: autonomy, robotics and AI-powered services. That shift isn’t entirely new, but observers say it’s accelerating — part strategic pivot, part defensive move to remake the company’s story.
Musk’s public comments about AI and specialized chips underscore the pivot. The industry itself is undergoing an AI inflection: Microsoft’s recent MAI model efforts illustrate how big tech is layering new capabilities on familiar products, and even mapping software and navigation is getting conversational AI upgrades like Google’s Gemini-powered navigation copilot. Those broader AI currents make it easier for automakers to sell a future where software and services matter as much as metal and paint. See Microsoft’s MAI work and Google’s navigation copilot for the wider context: Microsoft’s MAI-Image-1 and Google Maps’ Gemini copilot.
The risk, though, is obvious: promising future capabilities can buy time with investors and headlines, but it doesn’t immediately fix a gap in sales or margins. Bloomberg and other opinion writers argue Tesla may be swapping an EV crown for an expanding ledger of assurances about what it will deliver later — more promises, fewer immediate units.
BYD’s challenge: can volume turn into profit?
One reason BYD surpassed Tesla is sheer unit momentum, but that doesn’t guarantee easy sailing. BYD faces its own test in 2026: turning scale into stable margins, making overseas factories profitable, and monetizing software and energy services in a meaningful way. The EV market’s next phase will reward execution and margin discipline as much as headline volumes.
The practical upshot for drivers and investors
For prospective buyers, the shifting leaderboard doesn’t change the immediate shopping calculus: price, range, charging network and local incentives still dominate. For investors and industry watchers, though, the story has moved from pure-unit growth to a more complicated checklist — margins, factory efficiency, software monetization and brand stability.
Tesla remains a huge company with massive loyal demand in many markets. But the combination of stiffer rivals, product execution issues, public controversies and a narrative pivot toward robotics and software means the company’s trajectory is more uncertain than it was two years ago. Whether Musk’s next announcements will reverse the slide — or simply change the conversation — is now the central question.