Despite a slight recovery in December shipments, the annual 2025 delivery volume from the Chinese factory of global electric vehicle leader Tesla Inc. (TSLA.US) showed a significant decline compared to 2024.
Led by the world's wealthiest individual, Elon Musk, the automotive giant is grappling with markedly slowing global sales, having relinquished its dual crowns as the world's top EV seller and the market share leader in China.
As prominent Chinese EV manufacturers like BYD, NIO, XPeng, Li Auto, and Xiaomi continue to launch new models featuring innovative functions, competition in China's EV market has intensified dramatically, leading to Tesla losing both its leading position in China and its title as the world's largest EV manufacturer to BYD.
Preliminary statistics from the China Passenger Car Association indicate that Tesla shipped 851,732 electric vehicles from its Shanghai Gigafactory last year, representing an approximate 7% decrease year-on-year.
December shipments alone reached 97,171 units, marking only the fourth month in 2025 to record year-over-year growth.
It is noteworthy that these latest figures do not separate the proportion of shipments destined for export versus domestic sales, although a majority of these vehicles are sold locally within the Chinese market.
The chart above illustrates that Tesla's annual shipment volume in China declined once again in 2025.
Based on full-year 2025 EV sales/deliveries, Tesla has ceded its top position as the "world's largest electric vehicle (EV/BEV) manufacturer" to BYD, a conclusion drawn by multiple media outlets and research institutions using annual delivery/sales data.
The significant contraction for two consecutive years in China underscores the potentially prolonged and difficult challenges Tesla may face in one of its largest markets.
While market expectations for Tesla's valuation and fundamental prospects have largely pivoted towards its exclusive AI supercomputing-powered Full Self-Driving (FSD) system, Robotaxi (fully autonomous taxi) service, and the Optimus humanoid robot, Tesla's core automotive business and sales volume remain critically important.
The automotive segment continues to be the primary pillar supporting current cash flow and the balance sheet, and it forms the essential foundation for the FSD data feedback loop and the scale of the vehicle fleet required for Robotaxi operations.
More pragmatically, even as the "Tesla growth narrative shifts gears," the market will continue to use metrics like deliveries, automotive gross margins, price competition, and regional market share to calibrate short-term profitability and valuation safety margins.
Consequently, the impact of sales volume on fundamentals has evolved from being the "sole narrative" to becoming the "underlying chassis and constraint": sales volume and margins determine the "cash buffer and investor tolerance for error," while FSD, Robotaxi, and Optimus define the "upside potential and ceiling for Tesla's fundamental prospects."
In recent weeks, numerous media reports and sell-side analysts have pointed out that Tesla's ability to maintain a high valuation amidst declining deliveries hinges primarily on investors and "Musk loyalists" betting on the potential for massive, platform-level incremental profit pools from autonomous driving and robotics.
Even Tesla's own more conservative delivery outlook has been interpreted by some believers as evidence that near-term automotive weakness is inconsequential, given Musk's heavy bets on the large-scale monetization of autonomy and robotics.
However, this does not imply the automotive business is unimportant; rather, it signifies that the marginal pricing factor for the stock price now leans more heavily towards "when, through which regulatory pathway, and at what scale, fully commercialized autonomous driving and Robotaxi will be realized."
Previously, the Austin-based automaker experienced a jump in third-quarter deliveries, largely driven by U.S. consumers rushing to purchase EVs before a crucial federal subsidy expired.
However, challenges from weak demand persist for Tesla, exacerbated as governments worldwide, including the U.S., scale back policy support for electric vehicles.
Furthermore, although Musk has stepped back from his high-profile, contrarian role in Western politics, sluggish consumer demand remains a headwind weighing on Tesla's global sales.
In a challenging year (2025), Tesla yielded its title of "world's largest electric vehicle manufacturer" to China-based BYD.
There is no doubt that the competitive pressure Tesla faces in China's EV market is intensifying, with new entrants like Xiaomi launching technologically advanced, highly intelligent models that are increasingly winning over Chinese consumers.
Xiaomi's EV products directly target Tesla's Model 3 and Model Y.
According to data from the China Automotive Technology and Research Center and Bloomberg Intelligence, Xiaomi's YU7 SUV even approached Model Y's sales figures in certain months; for instance, in November, Xiaomi sold 33,591 YU7 units, compared to 33,935 Model Y units.
Preliminary data from the China Passenger Car Association also showed that China's wholesale sales of new energy vehicles—including plug-in hybrids and pure electric vehicles—in December 2025 saw a modest 4% year-on-year increase to 1.57 million units.
Calculations by Bloomberg Intelligence based on the association's data indicate that full-year 2025 NEV sales in China grew significantly by approximately 25%.
The passenger car association is scheduled to release the final 2025 full-year sales data later this month.
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