BYD, a Chinese competitor, emerged as the leading electric vehicle manufacturer last year, selling an impressive 2.26 million units.

This marks a surprising shift for Tesla, a company that once seemed unstoppable as it surpassed traditional automakers with greater resources, catapulting Elon Musk to the pinnacle of global wealth.

In the fourth quarter, Tesla’s sales reached 418,227, missing the revised target of 440,000 that analysts recently surveyed by FactSet had forecasted.

The drop in sales was significantly impacted by the end of a $11,000 ($US7,500) tax credit for electric vehicle purchases, a benefit phased out by the Trump administration at September’s close.

Consequently, Tesla’s stock dipped by 2.6%, closing at $US438.07 on Friday.

Even with multiple issues buffeting the company, investors are betting that Tesla CEO Musk can deliver on his ambitions to make

Tesla a leader in robotaxi services and get consumers to embrace humanoid robots that can perform basic tasks in homes and offices. Reflecting that optimism, the stock finished 2025 with a gain of approximately 11 per cent.

The latest quarter was the first with sales of stripped-down versions of the Model Y and Model 3 that Musk unveiled in early October as part of an effort to revive sales.

The new Model Y costs just under $40,000 ($UA59,000) while customers can buy the cheaper Model 3 for under $37,000 ($UA54,000).

Those versions are expected to help Tesla compete with Chinese models in Europe and Asia.

For fourth-quarter earnings coming out in late January, analysts are expecting the company to post a three per cent drop in sales and a nearly 40 per cent drop in earnings per share, according to FactSet.

Analysts expect the downward trend in sales and profits to eventually reverse itself as 2026 rolls along.

Musk said earlier last year that a “major rebound” in sales was underway, but investors were unruffled when that didn’t pan out, choosing instead to focus on Musk’s pivot to different parts of business.

He has has been saying the future of the company lies with its driverless robotaxis service, its energy storage business and building robots for the home and factory — and much less with car sales.

To do that successfully, it needs to take on rival Waymo, which has been operating autonomous taxis for years and has far more customers.

It also will also have to contend with regulatory challenges.

The company is under several federal safety investigations and other probes. In California, Tesla is at risk of temporarily losing its license to sell cars in the state after a judge there ruled it had misled customers about their safety.

“Regulatory is going to be a big issue,” said Wedbush Securities analyst Dan Ives, a well-known bull on the stock. “We’re dealing with people’s lives.”

Still, Ives said he expects Tesla’s autonomous offerings will soon overcome any setbacks.

Musk has said he hopes software updates to his cars will enable hundreds of thousands of Tesla vehicles to operate autonomously with zero human intervention by the end of this year.

The company is also planning to begin production of its AI-powered Cybercab with no steering wheel or pedals in 2026.

To keep Musk focused on the company, Tesla’s directors awarded Musk a potentially enormous new pay package that shareholders backed at the annual meeting in November.

Musk scored another huge windfall two weeks ago when the Delaware Supreme Court reversed a decision that deprived him of a $82b ($US55b) pay package that Tesla doled out in 2018.