Tesla $TSLA ( ▼ 1.12% ) reported weaker-than-expected vehicle deliveries in the fourth quarter, adding pressure to a business that’s now posted back-to-back annual declines. Q4 deliveries fell 16% year over year to 418,227 vehicles, missing expectations, while full-year deliveries dropped 8.5% to 1.64 million.
The quarterly shortfall came after a record Q3 that pulled forward demand due to the now-expired $7,500 federal EV tax credit. With that incentive gone, Tesla’s vehicles have effectively become more expensive, and demand appears to have cooled meaningfully into year-end.
BYD overtakes Tesla in annual EV sales
China’s BYD $BYDDY ( ▲ 5.12% ) sold 2.3 million battery electric vehicles in 2025, up 28% year over year, officially surpassing Tesla for the first time on a full-year basis. While BYD had already overtaken Tesla in certain quarters, this marks the first calendar-year win in pure EV volumes.
The contrast highlights intensifying global competition, particularly from Chinese manufacturers that continue to scale faster while maintaining lower price points.
Autonomy ambitions clash with near-term reality
Ahead of the report, Tesla released its own internal compilation of analyst estimates that pointed to lower delivery expectations than broader market consensus, a move widely interpreted as expectation management. Even so, the final numbers came in below that lowered bar.
While Tesla has rolled out cheaper, stripped-down versions of the Model Y and Model 3, prices remain higher than prior models that benefited from tax credits. At the same time, Elon Musk has increasingly shifted focus away from vehicle sales and toward autonomy, AI, and robotics as Tesla’s long-term value drivers.
For now, Tesla has yet to meet its goal of removing safety drivers from its Austin robotaxi fleet, and the near-term fundamentals of its core EV business continue to soften.