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Tesla Inc. ceded the title of world’s top seller of electric cars to China’s BYD Co., squandering a lead the Elon Musk-led company built as it popularized plug-in vehicles over the past decade.

The U.S. automaker reported a 16% decline in fourth-quarter deliveries, trailing analyst estimates. For the year, Tesla sales slid almost 9%, its second consecutive annual drop.

BYD, by contrast, increased battery-electric vehicle sales both for the quarter and the full year, delivering almost 2.26 million EVs in 2025 to Tesla’s 1.64 million.

Investors have paid little mind of late to Tesla’s decline in the global EV pecking order, with Musk prioritizing artificial intelligence, autonomous vehicles and humanoid robots. The CEO has drawn attention away from Tesla’s core business by touting progress in his long-standing effort to start a robotaxi service.

Standing up those operations will be crucial in 2026 given the outlook for EV demand in the U.S., Tesla’s largest market. President Donald Trump’s administration has ceased federal incentives supporting plug-in vehicle purchases and hollowed out fuel economy and emissions regulations that had generated billions of dollars in revenue for the company.

“Deliveries barely matter anymore,” Alexander Potter, an analyst with the equivalent of a buy rating on the stock, said in a note Jan. 2. Instead, the performance of Tesla’s shares in 2026 “should be driven by progress in AI and robotics.”

AI Emphasis

Wall Street had been bracing for a “hangover” for Tesla after tax credits for EV purchases ended in the US, William Blair analyst Jed Dorsheimer said in a note. He similarly posited that the company “is valued almost entirely on the transformation to real-world AI.”

BYD pulled away from Tesla last year after coming up just shy of the world leader in 2024. While the Chinese manufacturer delivered more fully electric cars in the fourth quarter of that year, Tesla maintained a slim lead on an annual basis.

In addition to selling far more EVs in China — where some of its cars are far cheaper than Tesla’s most affordable vehicle, the Model 3 — BYD has been surging in Europe.

Through the first 11 months of last year, BYD registered more cars than Tesla in both Germany and the U.K., the region’s two biggest EV markets. Tesla’s sales across Europe fell 28% during that span, and the company posted steep December declines in France, Spain and Sweden. 

2026 Outlook

Wall Street has grown increasingly skeptical about Tesla’s 2026 sales prospects. This time two years ago, analysts were predicting Tesla would deliver more than 3 million vehicles. The average estimate has plunged to around 1.8 million.

Tesla’s energy storage battery business, on the other hand, has never been stronger.

The company deployed 14.2 gigawatt hours of energy storage products last quarter, up from the 11 gigawatt hours a year earlier. Total deployments for the year jumped almost 50% to 46.7 gigawatt hours.

“The sustained growth of energy storage reflects structural tailwinds from AI-driven electricity demand, which is driving incremental storage requirements to support data center buildouts and power grid stabilization,” Tom Narayan, an RBC Capital Markets analyst with the equivalent of a hold rating on Tesla’s stock, said in a note.

Tesla ended last year by building anticipation for Cybercab, a two-seat compact car with butterfly doors. While prototypes have lacked a steering wheel or pedals, Tesla’s board chair Robyn Denholm told Bloomberg News in October that the company will sell the car with those components if required by regulators.

While Tesla began driverless testing with Model Ys in Austin late last month, consumers thus far are only able to summon rides from small numbers of cars in the Texas capital and the San Francisco Bay area with safety supervisors in the front seats.

For his part, Musk is optimistic about the year ahead.

“Great work by @Tesla team in 2025,” he wrote this week on X. “2026 will be epic!”