Tesla has surrendered its position as the world’s leading electric vehicle maker after deliveries fell sharply last year, highlighting growing pressure on its core car business even as it invests heavily in artificial intelligence and automation.

The company delivered about 1.6 million vehicles in 2025, nearly 10% down from its 2023 peak. China’s BYD overtook Tesla, selling more than two million battery-electric cars, according to Reuters.

Unlike Apple, often compared with Tesla for its once-dominant product ecosystem, the US automaker has struggled to maintain profitability as volumes slow. Analysts at Visible Alpha estimate Tesla’s automotive revenue in 2026 will be 16% below its previous high, while gross margins have fallen to roughly half their 2022 level.

Industry-wide subsidies for electric vehicles are shrinking, and growth in global demand has cooled, eroding Tesla’s earlier manufacturing advantages. Technologies once seen as proprietary, such as large-scale casting and charging networks, have also spread to rivals.

Chief executive Elon Musk has increasingly pushed the company towards artificial intelligence, self-driving technology and robotics. Tesla’s camera-based autonomous driving strategy requires heavy investment in AI, but could redefine how cars operate if successful.

Beyond vehicles, Tesla’s energy storage business has become its most profitable segment, with rising demand from power grids and expanding data centres offering new growth opportunities as the company looks beyond traditional car sales.