Kara Carlson, Linda Lew, Danny Lee and Bei Hu
Tesla ended last year on a roll, as investors increasingly bought into Elon Musk’s ebullience about autonomous vehicles. Winning over actual car buyers was another story.
Shares in the world’s most valuable car company soared in the second half, largely on the basis of its chief executive officer touting advances in artificial intelligence and robotics. But the progress Musk trumpeted did not translate to success in showrooms – the company most likely sold fewer vehicles in the last six months than a year earlier, despite record deliveries in the third quarter.
On Friday, Tesla is expected to report that it delivered about 440,900 vehicles in the fourth quarter, down 11 per cent from a year earlier, according to data compiled by Bloomberg. Tesla took the unusual step this week of publishing its own average of analyst estimates that was even more pessimistic, calling for a 15 per cent decline.
Wall Street has grown similarly gloomy about the outlook for 2026. This time two years ago, analysts were predicting Tesla would deliver more than 3 million vehicles. That average estimate for deliveries this year has plunged to roughly 1.8 million.
“Tesla investors are focused on how the company might look five, 10, 15 years down the road, and really discounting what they see in the near term,” Garrett Nelson, an equity analyst at CFRA Research, said. “The question is, can they maintain that, especially when we think headwinds are going to become more apparent in the financials?”
Chinese rival
Conversely, China’s largest car maker, BYD, met its full-year sales target and most likely surpassed Tesla to become the world’s largest electric-vehicle maker in 2025, a milestone overshadowed by a challenging outlook for the Chinese car market in the year ahead.
The car maker delivered 4.6 million vehicles last year, up 7.7 per cent from 2024, according to a statement. That’s in line with the full-year goal the company lowered in September.
BYD and its rivals face growing pressure in the coming year as China scales back some incentives supporting EV purchases. An influx of new models is also making domestic competition even fiercer, while trade barriers pose challenges for BYD’s ambitions to expand overseas.
BYD has faced stiffer competition in the past year from Geely Automobile Holdings and Xiaomi, whose new models and rapid innovations are winning over consumers.
BYD’s chief executive officer Wang Chuanfu said at an investor meeting in early December that the technological head start the company maintained over the past few years had diminished and affected domestic sales.
He hinted at new technology breakthroughs to come, with the company’s 120,000-strong engineering team giving him confidence about its ability to regain advantages, Chinese media reported.
A bright spot for BYD has been surging overseas sales. Deliveries outside China hit 1.05 million in 2025.
Topsy-Turvy
Even by the standards of Musk and Tesla – two names synonymous with turbulence – 2025 was a tumultuous year.
The car maker’s vehicle sales got off to a dismal start, partly due to the company retooling production lines at each of its car plants for the redesigned Model Y, its most popular vehicle. Another major factor was the intense backlash against Musk’s work for US President Donald Trump.
By early April, when Musk was publicly feuding with members of the administration over tariff policy, Tesla’s stock had plummeted 45 per cent for the year.
Musk spurred the recovery by stepping back from government and returning to work on a long-time goal: starting a ride-hailing business with cars he’s said will eventually be autonomous.
In June, Tesla launched an invite-only Robotaxi service in Austin, with safety operators on board to supervise each of the Model Ys ferrying Musk fans around the Texas capital. While the vehicles violated traffic laws on day one – drawing the attention of a federal regulator that has opened multiple investigations into the company’s driving systems – investors have shrugged off the safety concerns.
Tesla’s board then proposed a new compensation package for Musk in September, offering a payout potentially worth $1 trillion depending on milestones including delivering millions of robotaxis. Soon after, the comeback was complete – Tesla shares were trading higher for the year.
When the stock closed at a new all-time high on December 16, the company had added more than $915 billion in market capitalisation in just over eight months.
Driver assist
But while Tesla’s robotaxi prospects have captivated investors, car buyers have been relatively circumspect.
Tesla’s attempt to distinguish itself in China’s crowded electric vehicle market with driver-assistance functions is also not working out as companies including BYD and Xiaomi offer similar systems as standard features.
Due largely to BYD’s far higher sales in China and surge of momentum in Europe – where Tesla has been unable to obtain regulatory approval for its full self-driving (supervised) system – analysts expect the Shenzhen-based car maker to have sold more battery-electric vehicles worldwide for a fifth quarter in a row.
Bloomberg
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
