Automotive Industry

Decline in sales comes amid outrage of Elon Musk’s political forays, end in US electric vehicle tax breaks.

Tesla has lost its place as the top global seller of electric vehicles to Chinese company BYD, capping a year defined by outrage over CEO Elon Musk’s political manoeuvring and the end of United States tax breaks for customers.

The company revealed on Friday that it had sold 1.64 million vehicles in 2025, compared with BYD’s 2.26 million vehicles. The sales represented a 9 percent decline for Tesla from a year earlier.

Tesla, founded in 2003, had for years far outpaced traditional automakers in its development and sale of electric vehicles. However, the market has become increasingly crowded with competitors, with China’s electric vehicle market bounding ahead.

Musk’s embrace of US President Donald Trump in 2024 and subsequent spearheading of a controversial “government efficiency” panel (DOGE) behind widespread layoffs of federal workers has also proved polarising. The political foray prompted protests at Tesla facilities and slumps in sales.

The company’s fourth quarter sales totaled 418,227, falling short of the much-reduced 440,000 target that analysts recently polled by FactSet, an investment research firm, had expected.

Musk left DOGE in May, in what was largely viewed as an effort to reassure investors.

Tesla was also hard hit by the expiration of a $7,500 tax credit for electric vehicle purchases that was phased out by the Trump administration at the end of September. Trump’s opposition to electric vehicles has contributed to a strained relationship with Musk.

Despite the downward trends in sales, investors have generally remained optimistic about Tesla and Musk’s ambitious plans to make the company a leader in driverless robotaxi services and humanoid robots for homes.

Reflecting that optimism, Tesla stock finished 2025 up about 11 percent.

Tesla has also recently introduced two less expensive electric vehicle models, the Model Y and Model 3, meant to compete with cheaper Chinese models for sale in Europe and Asia.

Musk entered 2026 as the wealthiest person in the world.

It is widely believed that the public offering of his rocket company, SpaceX, set for later this year, could make the 54-year-old the world’s first trillionaire.

In November, Tesla’s directors awarded Musk a potentially historic pay package of nearly $1 trillion if ambitious performance targets were met.

Musk scored another huge win in December,when the Delaware Supreme Court reversed a lower court’s ruling, awarding him a $55bn pay package that had been paused since 2018.

Conversely, Tesla is at risk of temporarily losing its licence to sell cars in California after a judge there ruled it had misled customers about the safety of its driverless taxis.

The Delaware Supreme Court rules in favour of Musk and his $56bn compensation package.

Elon Musk’s 2018 pay package from Tesla, once worth $56bn, has been restored by the Delaware Supreme Court, in the United States, two years after a lower court struck down the compensation deal as “unfathomable”.

Friday’s ruling overturns a decision that had prompted a furious backlash from Musk and damaged Delaware’s business-friendly reputation.

The pay package was by far the largest ever, until Tesla shareholders approved a new, even larger pay plan of nearly $1 trillion in November.

The ruling means that Musk can finally get paid for his work since 2018, when he transformed Tesla from a struggling startup to one of the world’s most valuable companies.

The 2018 pay deal provided Musk options to acquire about 304 million Tesla shares at a deeply discounted price if the company hit various milestones, which it did.

Tesla estimated in 2018 that the plan was potentially worth $56bn, although given the rise in the stock price, the value ballooned to about $120bn by early November. The options represent approximately 9 percent of Tesla’s outstanding stock.

Musk never collected his stock options because, soon after shareholders approved the 2018 compensation, the board was sued by Richard Tornetta, an investor with just nine Tesla shares.

In 2024, after a five-day trial, Delaware Judge Kathaleen McCormick concluded that Tesla’s directors were conflicted and key facts were hidden from shareholders when they voted to approve the plan. She ordered that the 2018 plan be rescinded.

Musk accused Delaware judges of being activists, hostile to tech founders, and he urged businesses to follow Tesla and reincorporate elsewhere.

Dropbox, Roblox, The Trade Desk and Coinbase were among the handful of large companies that moved their legal homes to Nevada or Texas. However, Delaware remains by far the most popular legal home for US public companies.

Tesla’s board has warned that Musk, the world’s richest person who also leads the SpaceX rocket venture and the artificial intelligence startup xAI, could leave the electric car company if he does not get the pay he wants and an increase in his voting power.

In November, shareholders approved a new pay package that could be worth $878bn if Tesla meets targets for self-driving vehicles, a robotaxi network and sales of humanoid robots.

Tesla has taken steps to reduce the risk that a shareholder could tie up the 2025 package in the courts.

The Austin-based company is now incorporated in Texas, which allows Tesla to require that any investor or group of investors must own 3 percent of the company stock before suing for an alleged corporate law violation. A stake of that size would be worth about $30bn, and Musk is the only individual with that much stock.