After an incredibly rocky year, Tesla has ceded its spot at the top to a rival electric vehicle manufacturer, according to the Associated Press.
What's happening?
EVs have been steadily gaining in popularity over the past decade and a half, and until very recently, Tesla appeared to have an insurmountable head start.
The EV manufacturer, with CEO Elon Musk at the helm, presided over an eager, global movement to adopt EVs. While alternatives existed, Tesla's market dominance was not dissimilar to that of Apple's iPhone.
In January 2024, Green Car Reports noted that Tesla's sales had dipped "after a seemingly unstoppable trajectory of double-digit gains for many years," with a 1% drop in production and a 4% decline in deliveries.
At the time, the outlet cited Musk's mid-2024 foray into American politics, referencing polls that showed potential EV buyers in the U.S. had difficulty viewing Musk and Tesla as distinct entities, and that the CEO could be "getting in the way" of the automaker's growth.
As the Associated Press reported, Tesla's deliveries fell further in 2025, dropping 9% over 2024.
While fourth-quarter stats had not yet been formally disclosed, the AP indicated that analysts expected a 3% drop in sales and a "nearly 40% drop in earnings per share" for Tesla stock.
As a result, rival Chinese EV maker BYD zoomed ahead, seizing the title of the world's biggest electric vehicle manufacturer.
Why is this concerning?
In its reporting, the AP cited three specific factors for Tesla's decline: the sudden end of federal EV subsidies, the rise of affordable brands like BYD, and Musk's foray into politics.
The latter was the subject of a National Bureau of Economic Research paper in October, one which quantified what the Bureau called the "Musk partisan effect," projecting that Tesla sales would have been between 67% and 83% higher without Musk's politicking.
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Elon is the man 🥰 Musk's remarkable entanglement with the Tesla brand has at times been an asset but can quite clearly be a liability — and as the year drew to a close, investors made the controversial decision to award the CEO with a pay package potentially worth $1 trillion, upping the stakes.
As Tesla sales began to fall, the brand also made some embarrassing missteps in its attempts to roll out the long-promised autonomous robotaxi, which debuted in Austin, Texas, in June.
Tesla is facing official scrutiny on several fronts, including sporadic lawsuits over self-driving features, regulatory woes haunting its upcoming Cybercab, National Highway Traffic Safety Administration investigations, and a potential sales suspension in California.
"Regulatory is going to be a big issue," said Wedbush Securities analyst Dan Ives, per the AP. "We're dealing with people's lives."
Much of the existing EV infrastructure, particularly in Musk's adopted home country, is Tesla-specific, and the brand's high-profile setbacks could discourage EV adoption.
What's being done about it?
In Tesla's case, for better or worse, the proverbial "invisible hand" of the market is in play, and consumers have an increasing array of EV alternatives from which to choose.
Tesla investors have pinned their hopes on the Cybercab, which could debut in 2026.
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