The pullback comes after the elimination of a US$7500 ($13,000) tax credit in the US at the end of September 2025, with industry watchers noting it will take time for EV demand to rebalance.
But even before then, Tesla’s sales had struggled in key markets over CEO Musk’s political support of US President Donald Trump and other far-right politicians.
Tesla has also been grappling with rising competition from BYD and other Chinese companies, and from European giants.
Shenzhen-based BYD, which also produces hybrid cars, unveiled record EV sales in the past year on Thursday.
Known as “Biyadi” in Chinese – or by the English slogan “Build Your Dreams” – BYD was founded in 1995 and originally specialised in battery manufacturing.
The automotive juggernaut has come to dominate China’s highly competitive market for new energy vehicles, a term used to describe various vehicles from fully electric ones to plug-in hybrids. China is the world’s largest market for new energy vehicles.
BYD is now looking to expand its presence overseas, as increasingly price-wary consumption patterns in China weigh on profitability.
While BYD and other Chinese EV producers come up against hefty tariffs in the US, the company’s success is picking up in Southeast Asia, the Middle East and in Europe.
Elon Musk’s politics weighed on the demand for Tesla vehicles in 2025. Photo / Getty Images
Tesla only narrowly beat BYD in annual EV sales in 2024, with the US company’s 1.79 million outpacing the latter’s 1.76 million.
Tesla shares closed 2.6% down in New York on Friday.
Analysts at Wedbush Securities noted Tesla’s quarterly sales figure remained better than some had speculated.
They flagged the company faces a “more difficult demand environment following the end of the EV tax credit while Europe remains a headwind to its deliveries”.
The company still forecasts challenges obtaining certain regulatory approval in Europe – relating to self-driving technology – with sales potentially rebounding once the regulatory hurdles are cleared.
“Sales around smaller and emerging markets have started to see larger growth metrics than expectations, which look to offset the declines in key regions like China and Europe,” Wedbush analysts said.
– Agence France-Presse