Is Tesla's EV reign over?

Between rising competition and political backlash, Tesla is facing a global sales slump.

Feb 17, 2025 - 07:43

Tesla’s dominance in the global electric vehicle (EV) market is facing its biggest challenge yet. After years of leading the industry, Elon Musk’s company is now struggling with slowing sales, increased competition, and mounting production issues. Meanwhile, Chinese automaker BYD is closing in fast, making the race for the world’s top EV manufacturer tighter than ever.

The company has long banked on its ability to innovate through its battery and autonomous driving technology, but the days of delayed promises are gone. Now is the time for Tesla to execute on the innovations it has long promised. With BYD set to take the top spot in global sales in 2025, Tesla’s reign might be nearing its end.

Tesla’s slowing momentum

Tesla sold 495,570 vehicles in the fourth quarter of 2024, bringing its total annual sales to 1.79 million. While this still makes Tesla the leading EV manufacturer, the figure is concerning for investors. It represents a 1.1% decrease from the previous year—the first time in over a decade that Tesla’s sales have shrunk.

Cars are seen on the assembly line during a tour of the Tesla Giga Texas manufacturing facility ahead of the "Cyber Rodeo" grand opening party on April 7, 2022 in Austin, Texas.
SUZANNE CORDEIRO/Getty Images

Much of Tesla’s recent struggles can be attributed to its slowing growth in key markets. While the company once enjoyed a stranglehold on EV sales in the U.S. and Europe, its dominance is slipping. More automakers are entering the EV space, offering a wider variety of models at competitive prices. In China, Tesla’s second-largest market, the company is facing aggressive competition from domestic automakers, particularly BYD.

To counteract the slowdown, Tesla introduced incentives such as free charging, 0% financing, and lower lease rates. Those strategies helped boost fourth-quarter sales, but they weren’t enough to turn the year around. Tesla has also been forced to cut prices repeatedly, squeezing its once-impressive profit margins.

BYD’s meteoric rise

BYD ended 2024 with a record 4.25 million passenger car sales, 1.76 million of which were fully electric vehicles. This marks a staggering 41% increase from the previous year and puts the Chinese automaker within striking distance of Tesla. In December alone, BYD sold 207,734 EVs, a testament to its rapid expansion.

Members of media photograph a BYD Co. Atto 3 electric vehicle during a launch event in Incheon, South Korea, on Thursday, Jan. 16, 2025.
Bloomberg/Getty Images

Unlike Tesla, BYD has benefited from strong government subsidies and aggressive expansion strategies. The company’s focus on both fully electric and plug-in hybrid models has allowed it to capture a broader audience, particularly in markets where charging infrastructure is still developing. While Tesla has focused heavily on high-end EVs, BYD has successfully targeted budget-conscious consumers with a lineup of affordable electric cars.

BYD’s success is not limited to China. The company has been expanding rapidly into international markets, particularly in Europe and Latin America. BYD has strategically priced its models to undercut competitors while offering impressive range and technology. This approach has helped the automaker gain a foothold in regions where Tesla previously had little competition.

The EV landscape is changing

Beyond the Tesla-BYD battle, the broader EV industry is undergoing significant shifts. While many legacy automakers like Volkswagen, Nissan, and Stellantis have faced challenges in transitioning to electric vehicles, others—like General Motors and Ford—have managed to carve out a significant EV market share in the United States.

Meanwhile, Tesla’s reputation as an innovator is being tested. While it once led the EV market with groundbreaking technology, competitors are rapidly catching up. BYD has made significant advancements in battery technology, producing some of the most energy-dense and cost-effective batteries in the industry. Other automakers, such as Rivian and Lucid, are also making aggressive pushes to sell their EV tech and parts to other automakers, such as Volkswagen and Aston Martin.

The global EV market is also seeing shifts in consumer preferences. While Tesla has long positioned itself as a premium EV maker, many consumers are prioritizing affordability and practicality. BYD’s ability to offer reliable, low-cost EVs is proving to be a major advantage.

The impact of Elon Musk’s political involvement

Data looking at the impact of Elon Musk’s exponential political involvement is sparse, but there is some research to suggest that it has contributed to the company’s sales decline. A new study from the nonprofit EV Politics Project surveyed 600 people about their views on electric vehicles and Elon Musk. The researchers found that people who voted for Kamala Harris had far more favorable opinions about electric vehicle brands than people who voted for Donald Trump.

That’s hardly a surprise. In fact, nearly three-quarters of all survey respondents agreed that “EVs are for Leftists.” Yet, despite the left’s apparent affinity for electric vehicles, their impression of Tesla is far lower compared to Trump voters.

Impression of Tesla among Trump and Harris voters
EV Politics Project

As a consequence, people who said they were looking to buy an EV in the next year ranked Tesla far below competitors like Ford, Volkswagen. and Toyota. "Republicans are creeping toward greater EV acceptance, and willing or not, Elon’s journey to MAGA may have helped that," the report’s authors wrote. "Meanwhile, the Elon-driven Tesla headwinds problem among non-Republican consumers is clearly growing."

Tesla’s outlook for 2025

Tesla’s ability to maintain its top spot in 2025 will depend on several key factors. The long-awaited Model Y refresh has finally hit the market, but to remain competitive, Tesla will need to introduce more affordable models. The company’s rumored low-cost EV, sometimes referred to as the "Model 2," could be a game-changer, but details remain scarce.

With BYD rapidly gaining ground, Tesla must reassess its position in China. This could mean further price cuts or new localized production strategies to compete more effectively. However, Tesla’s reliance on price cuts is not a sustainable long-term strategy, as it continues to eat into profit margins. Instead, the company may need to innovate further in battery efficiency and manufacturing techniques to maintain its edge.

Another critical factor will be Tesla’s ability to deliver on its promises of technological breakthroughs. Musk has repeatedly touted advancements in battery technology and autonomous driving, but actual implementation has lagged behind expectations. Investors and consumers alike are growing impatient, and Tesla will need to demonstrate real progress to maintain confidence in its brand.

Final thoughts

BYD’s aggressive growth strategy, combined with Tesla’s recent struggles, has created a new dynamic in the global EV market. While Tesla still holds the top spot, its margin of lead has shrunk to just 30,000 vehicles. If BYD continues on its current trajectory, it could surpass Tesla in 2025, marking a historic shift in the industry.

For consumers, this competition could be a good thing. More competition often leads to better technology, lower prices, and more EV options. But for Tesla, the pressure is on. This year will be a defining one for the company, determining whether it can fend off its biggest challenger yet—or if BYD will take the crown as the world’s leading EV maker.

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