Tesla’s dominance of America’s electric vehicle (EV) market just hit a major speed bump. For the first time since 2017, the company’s U.S. EV market has seen shares slide below 40%, a signal that rivals are finally making a serious dent in Elon Musk’s once unshakable lead.
Sharp Decline In Recent Months
According to fresh data from Cox Automotive shared with Reuters, Tesla accounted for just 38% of EV sales in August — down from 48.7% in June and 42% in July. That marks its sharpest decline since Ford’s Mustang Mach-E disrupted the market in 2021.
The decline coincides with a wave of newer, budget-friendly, and incentive-packed EVs from both legacy carmakers and newcomers, making Tesla’s cars seem stuck in yesterday.
Competitors Are Gaining Ground With Fresh Models & Big Incentives
It’s a dramatic reversal for Tesla, which once controlled more than 80% of the U.S. EV sales. Today, the Elon Musk-led company is battling a flood of competition. Rivian is gaining traction, while legacy automakers like Hyundai, Kia, Toyota, and Volkswagen are wooing buyers by offering zero-interest financing, low lease rates, and even perks like free fast charging. For instance, Volkswagen’s EV sales surged more than 450% month-over-month in July.
Sales Struggles And Slowing Growth
The problem for Tesla isn’t just rivals’ aggressive incentives — it’s also Tesla itself. Its line-up is showing its age, where its most recent new model, the Cybertruck, launched in 2023, has failed to capture the mass-market appeal of the Model 3 or Model Y. Similarly, a refresh of the Model Y has failed to excite buyers.
Also, deliveries in the second quarter of 2025 were down 13.5% from year-over-year, putting the company on track for its second consecutive year of falling sales.
Musk’s Focus Shifts To AI, Robotaxis, And Robotics
Meanwhile, Musk’s attention is increasingly focused on robotaxis and humanoid robots, leaving Tesla short on new cars at a moment when buyers are spoilt for choice. This shift has raised quite a few eyebrows.
“I know they are positioning themselves as a robotics and AI company. But when you are a car company, without new products, your market share will start to decline,” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive.
Adding to the pressure is the looming expiration of the $7,500 federal EV tax credit at the end of September. That urgency has helped competitors boost sales between 60% and 120% in July, while Tesla managed just 7% growth.
Looking Ahead: Can Tesla Keep Its Lead?
Despite the decline, Tesla remains the market leader in U.S. EVs, and its stock has held steady — helped by a proposed $1 trillion compensation package for Musk, tied to boosting Tesla’s valuation to $8.5 trillion within the next decade. Investors appear to be betting on Musk’s long-term vision for AI and robotics, even as his political entanglements and brand controversies dent Tesla’s image.
Whether Tesla can regain its momentum may depend less on past dominance and more on how quickly it adapts to a market that’s no longer waiting for it to lead.
