US Electric Vehicle Sales Drop 6.3% as Tesla Loses Ground

Electric vehicle market sees first major sales decline as GM gains ground on Tesla’s shrinking market share

Key Takeaways

• US EV sales drop 6.3% in Q2 2025 with 310,839 units sold compared to 331,853 in the same period last year, marking only the third year-over-year decline on record
• Tesla’s market dominance erodes as US sales fall 10% year-over-year while GM more than doubles EV deliveries to 46,280 units, capturing 13% market share
• Federal EV tax credits expire October 1, 2025 creating uncertainty for Q4 sales after incentives reached record highs of 14.8% of average transaction price in June

Introduction

The US electric vehicle market faces its most significant test as sales decline for only the third time on record. Tesla’s continuing struggles drive the overall market downturn, while traditional automakers gain ground in an increasingly competitive landscape.

Total electric vehicle sales fell 6.3% year-over-year in the second quarter, dropping to 310,839 units from 331,853 in the same period last year. The decline signals a maturing market entering a period of volatility as rapid growth transitions to more incremental gains.

Key Developments

Tesla’s sales decline serves as the primary catalyst for the market downturn. The company’s US deliveries fell 10% year-over-year, with global deliveries dropping 13.5% to 384,122 vehicles worldwide in Q2 2025.

California, Tesla’s largest market representing about one-third of US EV sales, shows the starkest decline. Tesla sales in the state fell 21% for the quarter, marking seven consecutive quarters of year-over-year decline.

Non-Tesla EV sales provide a contrasting narrative, increasing slightly by 218 units compared to Q2 2024. This modest growth demonstrates the market’s underlying strength outside of Tesla’s specific challenges.

Market Impact

Tesla’s market share remains at 44.7%, though this represents a significant erosion from previous quarters. The company’s automotive revenue fell 20% in Q1 2025, with Q2 sales drops likely pressuring margins further.

General Motors emerges as the quarter’s biggest winner, more than doubling its EV sales to capture 13% market share. GM sold over 78,000 EVs in the first half of 2025, positioning itself firmly as the number two EV player behind Tesla.

The overall US EV market share dipped to 7.4% in Q2 2025, down from 8.0% a year earlier. Industry expectations for 2025 have been revised downward from a 10% share to an 8.5% share of total vehicle sales.

Strategic Insights

Traditional automakers capitalize on Tesla’s slowdown through established dealer networks and diversified product portfolios. GM’s success with the Chevrolet Equinox EV, which sold over 27,000 units in the first half of 2025, demonstrates the effectiveness of this strategy.

The luxury EV segment shows particular strength, with brands like BMW, Mercedes, Volvo, Cadillac, Genesis, and Acura growing their sales. GM’s Cadillac division gains traction with new models including the Escalade IQ and Optiq.

Ford faces severe challenges with a 31.4% drop in EV sales, attributed to Mach-E recalls and model changeover shutdowns. The company shifts strategy toward affordable models under $30,000, though these won’t launch until 2027.

Expert Opinions and Data

Industry analysts attribute Tesla’s struggles to consumer backlash against CEO Elon Musk’s political involvement, an aging product lineup, and intensified competition. The total decline represents 20,511 fewer units sold year-over-year.

Cox Automotive’s Kelley Blue Book team confirms the 6.3% decline aligns with their forecasts, noting that first-half volume reached a record 607,089 units despite quarterly fluctuations. This represents a 1.5% increase from 2024, indicating underlying market resilience.

Tesla executives emphasize future growth opportunities in autonomous technology and the Optimus humanoid robot project, though these longer-term investments don’t immediately offset declining vehicle sales. The Wall Street Journal reports these strategic pivots as responses to mounting competitive pressure.

The used EV market shows remarkable strength, with retail sales surpassing 100,000 units in Q2 2025 for the first time. This growth accelerates as new vehicle incentives face elimination and availability expands.

Conclusion

The US EV market enters a critical transition phase as Tesla’s dominance faces unprecedented challenges and traditional automakers gain meaningful traction. The impending expiration of federal tax credits on October 1, 2025, creates additional uncertainty for the sector’s near-term trajectory.

GM’s rapid ascension to 13% market share and the diversification across luxury brands indicate a fundamental shift in competitive dynamics. The market’s long-term growth trajectory remains intact despite quarterly volatility, with the used EV segment emerging as a significant growth driver.