Tesla said Wednesday its profit fell 46% in 2025 as vehicle sales declined, competition intensified and costs rose, underscoring the company’s loss of global EV leadership and its accelerating pivot toward autonomous technology.
Profits Slide as Sales and Margins Stay Under Pressure
Tesla reported a 46% year-over-year drop in profit in its latest earnings update Wednesday evening, capping a second straight year of declining vehicle sales for the once-dominant electric carmaker.
Tesla profit plunge were broadly expected after Tesla earlier disclosed weak quarterly deliveries, reflecting slowing demand and price pressure across its core vehicle lineup. Revenue growth from businesses such as energy storage failed to offset lower car sales.
Tesla sold 1.65 million vehicles in 2025, down from 2024 levels. The decline coincided with rising labor and production costs and a fragile global economy that squeezed profit margins.
The company has also lost a lucrative revenue stream tied to regulatory credits after policy changes under President Trump rolled back emissions rules and incentives. Automakers previously purchased credits from Tesla to meet clean-vehicle requirements, providing billions in high-margin income.
Tesla did not respond to a request for comment beyond its earnings call remarks.
BYD Surpasses Tesla as Chinese Rivals Gain Momentum
Tesla is no longer the world’s top seller of electric vehicles. China’s BYD claimed the lead in 2025, selling more than 2.25 million battery-powered vehicles, compared with Tesla’s 1.65 million.
Other Chinese automakers are also expanding rapidly. Geely boosted battery-powered vehicle sales by about 90% year over year, while SAIC reported growth of roughly 33%, according to company data.
Globally, demand for electric vehicles continues to rise, particularly outside the United States. In December, the European Union recorded more new registrations of pure electric vehicles than gasoline-powered cars for the first time. EV sales in the EU rose more than 50% from a year earlier, while gasoline and diesel sales fell about 20%.
In the U.S., EV demand has been more volatile. Sales spiked in mid-2025 as consumers rushed to use a federal tax credit before it expired in September, then dropped sharply. Automakers say it remains unclear how the market will perform without incentives incentives despite the recent tesla profit plunge.
Musk Bets on AI, Robots as Brand Perception Slips
Chief Executive Elon Musk said Tesla is accelerating its transition away from traditional vehicles toward autonomous technology, robotaxis and humanoid robots.
The company is discontinuing its higher-end Model S and Model X vehicles and reallocating production space at its Fremont, California, plant to build its Optimus humanoid robot, which Musk said will begin production this year.
Tesla is also focusing on its steering-wheel-free Cybercab, designed for its robotaxi business. “We would expect over time to make far more Cybercabs than all of our other vehicles combined,” Musk said during the earnings call.
Musk warned investors that Tesla plans to spend about $20 billion on capital expenditures in the coming year, more than double its 2025 spending. “We’re making big investments for an epic future,” he said.
At the same time, Tesla’s brand reputation has weakened in the U.S. Pollster Evan Roth Smith of the Electric Vehicle Intelligence Report said recent surveys show Tesla has more negative than positive sentiment among American consumers.
“Most carmakers don’t have any sort of political valence or mass controversy attached to them,” Roth Smith said. “Tesla is very unusual in that regard.”
Brand loyalty is also slipping. Data from LexisNexis Risk Solutions show Tesla fell to third place in industry loyalty rankings in 2025, down from first or second in prior years.
Roth Smith said the Tesla profit plunge and the heavy emphasis on autonomy has made buyers wary. “There’s a lot of skepticism from consumers over whether this technology is safe for mass deployment yet,” he said.
Source:
