Tesla’s US sales fell an estimated 17% year-over-year in January, with the automaker moving 40,100 vehicles during the month. This decline is part of a trend that has now defined the better part of two years for Tesla’s US business, with domestic registrations declining year-over-year in nine of the past twelve months. The January estimates continue a trend that started after the $7,500 federal EV tax credit expired on September 30, 2025.
The expiration of the tax credit effectively raised the cost of every Tesla by that amount overnight, making the brand less competitive in the market. According to Cox Automotive, the average EV transaction price rose 18.1% year-over-year to $51,981 in January 2026, further contributing to the decline. This increase in prices has had a severe impact on the broader EV market, with EV market share in the US collapsing to just 6.6% of retail sales.
The second force driving this decline is Tesla-specific, with the brand damage from Elon Musk’s political activities and his links to Epstein continuing to compound. Tesla's brand value crashed 36% in 2025, falling to $27.6 billion — less than half its $66.2 billion peak in 2023, according to Brand Finance. This decline in brand value has had a devastating impact on Tesla’s California sales, which have been dropping by double digits while the rest of the state's EV market grew.
Tesla launched the lower-priced Model Y Standard ($39,990) and Model 3 Standard ($36,990) in Q4 2025 to address affordability concerns. However, price cuts alone aren’t pulling buyers back in. The problem is no longer just price, it is the brand itself. Tesla still holds 46% of the US EV market, down from 49% in 2024 and 75% in early 2022.
The Chevrolet Equinox EV alone sold nearly 58,000 units, making it the third best-selling EV in America behind only the Model Y and Model 3. While GM is gaining ground, the overall US EV market contracted for the first time in years, with total 2025 EV sales landing at roughly 1.28 million units, down about 2% from 2024.
The picture is far worse internationally, with BYD overtook Tesla as the world’s largest EV seller in 2025, moving 2.26 million battery-electric vehicles compared to Tesla’s 1.64 million. That gap is widening, not closing. In Europe, where Tesla’s sales collapsed 27.8% for the full year, 2026 has started even worse, with registrations across five major markets down 44% year-over-year in January.
Tesla's response to this multi-market collapse has been to pivot away from traditional auto sales entirely. The company announced the discontinuation of the Model S and Model X, and Tesla executives told investors to focus on “transportation as a service” through robotaxis and Optimus robots rather than vehicle deliveries. This shift in strategy is likely to have significant implications for the company's future success.
The US was supposed to be Tesla’s stronghold, the market where brand loyalty runs deepest and competition is thinnest. A 17% January decline, on its own, is not alarming given the post-tax credit environment, but it’s a problem when it is your last major stronghold. Every EV maker took a hit, but Tesla has now been in decline domestically for nine of the past twelve months.
The company's response to this decline has been to slash prices and focus on new revenue streams. However, given Musk’s track record on timelines, it is unclear whether these efforts will be enough to turn the company around. The future success of Tesla will depend on its ability to adapt to changing market conditions and consumer preferences.
