Tesla Profits Plunge 46% in 2025 – Loses Global EV Crown for First Time

Tesla released its Q4 2025 and full-year earnings on January 29, 2026 — and the numbers confirmed what many analysts had feared: 2025 was the company’s first real profit contraction since the early Model 3 ramp.Key financial highlights (GAAP):Full-year revenue: $96.8 billion (+2% YoY) Automotive revenue: $81.5 billion (-1%) Net income: $7.9 billion (-46% YoY) Automotive gross margin: 16.3% (down from 18.7% in 2024) Free cash flow: $3.6 billion (down 38%) Cash & equivalents: $29.1 billion (still strong) Deliveries totaled 1.81 million vehicles in 2025 — up only 1% from 2024’s 1.81 million — while BYD overtook Tesla as the world’s largest EV seller by volume (pure BEVs + PHEVs combined) with ~3.9 million units.Why Profits Slumped 46%Aggressive Price Cuts — Tesla slashed prices multiple times in 2025 (Model Y down ~20% in some markets) to defend volume amid slowing demand and rising competition. Margin Compression — Lower average selling prices + higher raw material/logistics costs + regulatory credit revenue dropping sharply. China & Europe Pressure — BYD, NIO, XPeng, Li Auto, Zeekr and others gained share in China; European sales weakened due to subsidy phase-outs and local competition. Higher Operating Expenses — R&D spend rose (Dojo, Optimus, FSD v13), new factories (Mexico delayed), and increased headcount earlier in the year. Energy Storage Growth Not Enough — Megapack revenue grew strongly (~+80% YoY), but still only ~15% of total revenue — not enough to offset automotive weakness. CEO Elon Musk acknowledged the challenges in the earnings call: “We went through a very difficult year… but the foundation we built — especially in energy, AI compute, and autonomy — positions us for much stronger growth in 2026 and beyond.”2026 OutlookGuidance: Musk reiterated goal of 20–30% delivery growth in 2026 (implying 2.17–2.35 million vehicles). New models: Affordable “Model 2”/Redwood platform targeted for mid-2026 production start. Energy: Megapack factory ramp in Texas and Shanghai expected to double energy revenue again. FSD & Robotaxi: Unsupervised FSD rollout planned in Texas/California in 2026; Robotaxi unveil still targeted for August 2026. At digital8hub.com, we track EV market trends, Tesla earnings, automotive stocks, energy storage, and autonomous driving. Looking for Tesla vs. BYD comparisons, EV adoption forecasts, or investment implications of the 2025 slump? Check our finance and tech sections.Tesla lost its EV sales crown and saw profits nearly halve — but the company is betting big on AI, energy, and cheaper models to reclaim momentum in 2026.