Tesla market share in US drops to lowest since 2017 as competition heats up

Tesla Inc.'s market share in the US has dropped to an eight-year low as buyers opted for electric cars that weren't from the stable of Elon Musk.

Tesla cars in a parking area in the US. For now, Tesla's core auto business remains its money maker.(AP/Representative)

The company run by the world's richest person accounted for 38% of the total EV sales in the US in August 2025, slipping below the 40% mark for the first time since October 2017, when it was ramping up production of the Model 3—its first mass-market electric car, according to Cox Automotive data shared with Reuters. Tesla's market share fell to 42% in July from 48.7% in June, in the sharpest drop since March 2021.

The decline in Tesla's car sales underscores the threat from electric carmakers ramping up sales before EV tax credits expire by the end of September.

To be sure, while other automakers are rolling out new electric cars, Tesla has turned its focus to robotaxis and humanoid robots, delaying and cancelling plans for cheaper electric cars.

Still, much of Tesla's trillion-dollar valuation hangs on that bet.

On Friday, Tesla's board of directors proposed an unprecedented $1 trillion pay package for Elon Musk that, apart from other operational milestones, is pegged to Tesla's market cap rising to $8.5 trillion over the next decade.

For now, Tesla's core auto business remains its money maker. Its last new model was the Cybertruck that rolled out in 2023 with nothing of the success of the Model 3 sedan or Model Y SUV. Tesla has refreshed the Model Y, once the world's best-selling car, but the changes failed to live up to expectations.

Now, Tesla is on track for a second straight year of sales decline.

“I know they're positioning themselves as a robotics, AI company. But when you're a car company, when you don't have new products, your share will start to decline,” Stephanie Valdez Streaty, Cox's director of industry insights, said in an interview with Reuters.

Musk's right-wing political work and association with US President Donald Trump also has hurt the brand. Musk helped guide Trump's efforts this year to downsize and reshape the US government but left the administration in May and had a falling out with the Republican president.

EV sales in the US rose more than 24% month-on-month in July to 128,268 units, according to the Cox data, driven by the looming end of a $7,500 tax credit for EVs and attractive deals. Tesla saw sales rise 7% to 53,816, even as its market share fell. In August, Tesla's growth slowed to 3.1%, and the broader market grew by 14%, the preliminary data showed.

Attractive Offerings

For years, Tesla as the market leader was able to increase sales rapidly and command a premium for its vehicles, allowing it to rake in profits. But with weakening sales and a host of competitors, Tesla has had to cut prices in recent years, squeezing its margins and worrying investors.

The falling share reveals Tesla's increasingly difficult choice of supporting sales using higher, profit-destroying incentives for buyers or maintaining profits and giving up market share.

The July data showed rivals outgrowing Tesla. Hyundai, Honda, Kia Motor and Toyota rolled out higher incentives than Tesla and drove up EV sales between 60% and 120%, boosting market share.

“These legacy manufacturers are benefiting from this sense of urgency, and they are able to have attractive offerings for their vehicles, and it's working,” Streaty said. “I think we're going to continue to see this momentum through September.”

Competition against Tesla has turned fierce at EV dealer lots.

While scouring for a car for everyday use last month, Topojoy Biswas, a 41-year-old technology worker in the San Francisco Bay area, was greeted with a range of deals, including zero down payment and zero interest rates, from various EV dealers.

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Instead of the Toyota Camry he initially was eyeing, Biswas bought a VW ID.4, Volkswagen's competition to the Model Y, lured by an attractive lease price and an offer of free fast-charging. Volkswagen sales rose more than 450% in July from the previous month. “It felt like the deal of the market,” Biswas said.