Tesla shares fell 4.14% as 2025 EV sales hit largest annual drop on record

Tesla shares fell 4.14% in pre-market trading on January 7, 2026, signaling investor concern ahead of the company’s fourth-quarter earnings report.

The decline follows Tesla’s revelation that its 2025 electric vehicle sales recorded the largest annual drop in its history, with total deliveries falling 8.5% to 1.63 million units. The company lost significant market share in Europe and China to more affordable rivals like BYD, which saw global sales surge by 28% in the same period. Tesla’s European market share dwindled from 2.4% to 1.7%, as buyers increasingly opted for lower-priced alternatives such as BYD’s Dolphin Surf model.

Investor optimism around future products like the Cybercab and Optimus humanoid robot has not offset near-term challenges. CEO Elon Musk has delayed mass production of the Cybercab until late 2026, while Optimus remains years from commercialization. These timelines raise questions about Tesla’s ability to offset declining EV sales with new revenue streams, particularly as its current valuation—trading at a price-to-earnings ratio of 292—appears disconnected from short-term earnings potential.

With fourth-quarter profits likely to contract amid weak delivery figures, the stock faces heightened downside risk. Analysts warn that without near-term improvements in market share or regulatory approvals for key technologies, Tesla’s high valuation could struggle to justify investor enthusiasm in 2026.

Tesla’s valuation is not only driven by current earnings but also by expectations for future product launches. Investors are closely watching whether the company can deliver on its ambitious roadmap, particularly for Cybercab and Optimus, and whether these innovations will generate revenue within the next few years.

Until then, the stock remains vulnerable to broader market sentiment and earnings performance. Analysts suggest that short-term investors may want to wait for clearer signs of stabilization in delivery growth before committing capital.