Tesla reported a 46 percent year-over-year decline in profits during its Wednesday evening earnings update, marking a difficult period for the electric vehicle manufacturer as it lost its position as the world’s top EV seller.
CNBC reports that Tesla reported a 46 percent year-over-year decline in profits during its Wednesday evening earnings update as Elon Musk’s EV giant lost its position as the world’s top EV seller. Musk also revealed that the company is attempting to pivot away from traditional vehicle manufacturing in favor of robotics. Tesla shares are down two percent in Thursday morning trading.
Despite revenue growth in segments including energy storage, these gains have not offset declining vehicle sales. Tesla has experienced two consecutive years of sales decreases. Chinese automaker BYD has emerged as the new industry leader, selling more than 2.25 million battery-powered vehicles in 2025. In comparison, Tesla sold 1.65 million vehicles, fewer than in 2024.
Tesla’s response involves transforming from a traditional automotive company to what it describes as a “physical AI company,” emphasizing self-driving technology, robotaxi services, and humanoid robot development.
Tesla announced it will discontinue production of its higher-end Model S and Model X vehicles. The Model S, which Tesla called the “world’s first mass-produced, highway-capable EV,” held symbolic importance as the first vehicle produced at Tesla’s Fremont factory.
The company is redirecting focus toward the Cybercab, a vehicle designed without steering wheels or pedals for autonomous operation. CEO Elon Musk stated during the earnings call: “We would expect over time to make far more Cybercabs than all of our other vehicles combined. The vast majority of miles traveled will be autonomous in the future … I’m just guessing, but probably less than five percent of miles driven will be where somebody is actually driving the car themselves.”
Tesla is repurposing the Model S and Model X production lines to manufacture the Optimus humanoid robot, with production beginning this year. Musk revealed Tesla would spend approximately $20 billion on capital expenditures in the coming year, more than double the 2025 amount. “We’re making big investments for an epic future,” Musk said.
The promised “next-generation” vehicle Musk teased in late 2023 has failed to materialize. Reports suggested this vehicle would sell for approximately $25,000, but Musk eventually confirmed the company would focus on the Cybercab instead. Tesla rolled out slightly less expensive versions of the Model 3 and Model Y rather than a significantly cheaper option.
The U.S. electric vehicle market faces substantial obstacles, in part because President Trump has eliminated EV incentives and regulations. A consumer tax credit expiring at the end of September prompted a sharp summer purchase increase, followed by a dramatic decline. Trump policies also eliminated Tesla’s profitable emissions credit revenue stream.
Despite U.S. challenges, EVs continue gaining ground globally. In December, European Union buyers registered more new pure electric vehicles than traditional gasoline vehicles for the first time. European EV sales increased by more than 50 percent year-over-year. In China, most new vehicles are already electric or plug-in hybrids, and Chinese EV exports are expanding rapidly in Mexico, Brazil, and Canada.
Beyond BYD’s success, Chinese automaker Geely increased battery-powered vehicle sales by 90 percent year-over-year, while SAIC grew sales by 33 percent.
Musk has consistently maintained that Tesla’s future lies in autonomous vehicles, AI, and humanoid robots. However, he has frequently missed projected timelines. The driver-assistance software still requires human oversight, and the robotaxi service remains limited to small pilot programs in Texas and California, despite Musk’s projection that service would reach 50 percent of America by end of 2025.
Read more at CNBC here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
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