Tesla Car Sales Drop 9% in 2025: What This Means for Electric Vehicle Investors and Businesses in Oman
Tesla has lost its position as the world’s leading electric vehicle (EV) seller following the removal of federal tax credits that had incentivized EV purchases in the United States. The company reported a 16% decline in car sales during the final quarter of 2025, contributing to a 9% drop in overall annual sales, even as other automakers saw growth. Notably, Chinese automaker BYD surpassed Tesla in EV sales for the first time in 2025.
The latest sales data underscore Tesla’s shift away from its earlier ambition to become the largest global car manufacturer. Originally targeting sales of 20 million cars annually by 2030—roughly double Toyota’s current output—Tesla CEO Elon Musk has redirected the company’s focus toward self-driving technology and humanoid robots, sectors that currently yield limited revenue amid intense competition.
While Tesla remains the largest U.S. EV producer, its declining sales signal a broader slowdown for EV adoption within the American market—a key area in combating climate change and urban pollution. Last year, the Trump administration and Republican-controlled Congress eliminated federal tax credits of up to $7,500 for EV buyers. Additionally, efforts began to weaken clean air regulations that have previously encouraged automakers to increase EV production.
Tesla, which holds 45% of the U.S. EV market and previously benefited significantly from federal incentives, was particularly impacted by these policy changes. Despite Musk having been a major supporter of Donald Trump’s 2024 presidential campaign, Republican priorities have favored the fossil fuel industry since regaining political control.
In 2025, Tesla delivered 1.64 million vehicles globally, down from nearly 1.8 million in 2024. Fourth-quarter deliveries, most affected by the tax credit expiration in late September, dropped to 418,000 from 496,000 the previous year. Meanwhile, BYD announced a 28% increase in global EV sales for 2025, reaching 2.26 million units, with growing sales outside China, mainly in Asia, Europe, and Latin America. However, Chinese EVs face high tariffs that effectively bar their entry into the U.S. market.
Industry analysts anticipate subdued U.S. EV sales in 2026 but expect a rebound in 2027 when more affordable electric models, priced around $30,000, including a midsize Ford pickup, become available. Currently, many EVs are priced significantly higher than comparable gasoline vehicles. Kevin Roberts, director of economic and market intelligence at CarGurus, noted, “2026 could be a tough year,” but predicted market growth as lower-cost models hit the market.
Tesla’s fourth-quarter decline partly resulted from buyers rushing to secure tax credits before they ended. November sales of EVs across all brands fell over 40% compared to the previous year, according to Cox Automotive. The removal of incentives has prompted price cuts among automakers, increasing the availability of EVs priced under $40,000, such as the Chevrolet Equinox EV, Hyundai Ioniq 5, and Nissan Leaf.
In October, Tesla introduced a more affordable Model 3 variant at $37,000, featuring cheaper interior materials, the absence of FM radio, and a shorter driving range compared to versions priced at $42,500 or more. EV prices are expected to continue declining as battery costs drop and performance improves with faster charging and longer ranges.
Stephanie Valdez Streaty, director of industry insights at Cox Automotive, projects EVs will account for 8.5% of new U.S. car sales in 2026, recovering from 5.4% in November, and rising to 17% or more by 2030. Growth will be strongest in states offering purchase incentives, such as California, Colorado, and New York, alongside expansion of charging infrastructure, particularly in apartment complexes and workplaces to aid those without private charging options.
Hybrid vehicles, which combine internal combustion engines with electric motors and can run short distances on battery power, continue to see strong growth as consumers seek electric options with fewer charging concerns. Used EVs are also in high demand, often priced competitively with gasoline cars.
Tesla’s sales peak came in 2023 with 1.8 million deliveries, even as global EV sales surged, especially in Asia and Europe. Tesla is losing ground not only to Chinese rivals like BYD but also to established automakers. In Europe, Volkswagen now outsells Tesla EVs.
Tesla’s models, especially the Model Y SUV, released in 2020, have seen limited updates, and the recently launched Cybertruck has underperformed. Valdez Streaty stated, “Since they haven’t had any new products, their share has dwindled.”
The company’s sales also face challenges due to Musk’s public political stances, which have alienated many liberal consumers—the largest EV buyer demographic—particularly in countries like Germany and France, where Tesla sales have declined after Musk endorsed far-right politicians.
Looking ahead, Tesla might face reduced competition in 2026 as automakers like General Motors and Ford slow their rollout of new EV models. Analyst Tom Narayan of RBC Capital Markets noted that with government efforts to stabilize prices and support domestic suppliers, Tesla could benefit.
Despite the decline in car sales, Tesla’s stock remains near record highs, driven by investor confidence in its potential dominance of the self-driving taxi market. Tesla’s Robotaxi service operates in Austin, Texas, and San Francisco but still requires human safety monitors, missing CEO Elon Musk’s 2025 target for fully autonomous rides. Competitor Waymo operates approximately 2,500 driverless taxis across multiple cities and plans expansion.
This article was originally published by The New York Times.
Special Analysis by Omanet | Navigate Oman’s Market
Tesla’s loss of dominance in the electric vehicle (EV) market amid U.S. policy shifts signals a cautionary tale for Oman’s emerging green tech and automotive sectors. For businesses, this highlights the critical impact of government incentives and regulatory support on EV adoption and industry growth. Smart investors and entrepreneurs in Oman should monitor global policy trends closely and consider opportunities in affordable EV solutions and hybrid technologies, anticipating market rebounds fueled by cost reductions and expanding charging infrastructure.
