China’s electric vehicle giant BYD has crossed a historic milestone, overtaking Tesla to become the world’s largest seller of electric vehicles by annual sales. The shift marks a defining moment in the global EV race, underscoring the growing dominance of Chinese automakers and the mounting challenges facing the world’s most recognisable EV brand.
Tesla disclosed on Friday that its global vehicle deliveries fell by nearly 9% in 2025, with total sales declining to 1.64 million units. It was the company’s second consecutive year of falling deliveries, a trend that has unsettled investors and analysts alike. By contrast, BYD reported a sharp rise in demand, saying sales of its battery-powered vehicles surged by almost 28% last year to more than 2.25 million units, pushing it decisively ahead of its American rival.
The figures confirm a changing of the guard in the EV sector. Once the undisputed leader of the electric revolution, Tesla now finds itself grappling with intensifying competition, shifting consumer sentiment, and policy headwinds, while BYD continues to expand aggressively across global markets.
A Tough Year for Tesla
Tesla’s struggles were particularly pronounced toward the end of the year. Sales fell by 16% in the final quarter of 2025, a drop partly attributed to the repeal of a key US government subsidy that had reduced the price of certain electric and hybrid vehicles by up to $7,500. The removal of that incentive dampened demand at a time when consumers were already facing economic uncertainty.
Beyond policy changes, Tesla has also contended with a mixed reception to new vehicle offerings and growing unease among some buyers over the political activities of its chief executive, Elon Musk. Musk’s high-profile involvement in politics and his brief role in the US government earlier in the year led some investors to question whether his attention was sufficiently focused on Tesla’s core business.
Wall Street analysts have responded by trimming their Tesla sales forecasts for 2026, reflecting a more cautious outlook. While Tesla attempted to counter slowing demand by introducing lower-priced versions of its two best-selling models in the US in October, the move has so far failed to reverse the broader downward trend.
BYD’s Rise and China’s EV Advantage
BYD’s ascent highlights the growing strength of China’s EV ecosystem. Supported by deep supply chains, aggressive pricing strategies, and rapid innovation, Chinese manufacturers have increasingly put pressure on Western carmakers. Brands such as Geely and MG, alongside BYD, have consistently undercut established rivals, offering competitively priced vehicles with advanced features.
BYD, now China’s largest electric car company, has benefited from this environment while expanding beyond its home market. The Shenzhen-based firm has made significant inroads into Latin America, Southeast Asia, and Europe, even as many countries impose steep tariffs on Chinese-made EVs.
In October, BYD revealed that the UK had become its largest overseas market. Sales in Britain surged by an extraordinary 880% in the year to the end of September, driven largely by demand for the plug-in hybrid version of its Seal U SUV. The growth illustrates how BYD has been able to adapt its product mix to local preferences, blending affordability with practicality.
Despite its rapid rise, BYD is not without challenges. Its sales growth in 2025 slowed to the weakest pace in five years, reflecting fierce competition within China’s crowded EV market. Still, even with moderating growth, BYD’s scale and pricing power have cemented its position as a global EV powerhouse.
Tesla’s Long-Term Bet on Technology
While Tesla has lost its crown in annual EV sales, it continues to outperform BYD in profitability, remaining one of the most lucrative carmakers in recent quarters. Musk’s long-term strategy hinges on ambitious bets beyond traditional car sales, including self-driving technology, robotaxis, and humanoid robots.
Tesla has invested heavily in its Optimus humanoid robot and plans to roll out self-driving robotaxi services in 2026. Analysts say the success of these initiatives could be pivotal. Dan Ives of Wedbush Securities has argued that Tesla could command as much as 70% of the self-driving market over the next decade, citing the company’s scale and technological reach.
Musk himself faces immense pressure to deliver. A record-breaking compensation package approved by shareholders in November could see him earn up to $1 trillion if Tesla meets aggressive performance targets over the next decade. As part of the deal, Musk is also required to sell a million humanoid robots within ten years.
A Shifting Global EV Landscape
The rivalry between BYD and Tesla reflects broader changes in the global auto industry. Chinese manufacturers are no longer merely catching up; they are setting the pace in pricing, volume, and market expansion. Tesla, meanwhile, remains a technological leader but must navigate a more crowded and politically complex landscape than ever before.
Even as BYD celebrates its sales victory, questions remain about sustainability, profitability, and long-term dominance. For Tesla, losing the top sales spot may be symbolic, but its future will depend on whether its next-generation technologies can redefine mobility once again.
For now, the numbers tell a clear story: the centre of gravity in the electric vehicle world is shifting east—and the race is far from over.
