Tesla’s grip on US EV market weakens and slips by 38%

Tesla’s control of the American EV market just took its biggest beating in almost a decade. In August 2025, the company’s US market share collapsed to 38%, falling below 40% for the first time since 2017.

Back then, Tesla was still ramping up the Model 3. Now, it’s being pushed out of the spotlight by cheaper, newer, and more competitive options. At the same time, Elon is chasing robots instead of cars. While Tesla’s lineup stagnates, rivals are throwing everything at buyers, and it’s working.

Cox’s data shows Tesla lost over 10 percentage points of market share in just two months, slipping from 48.7% in June to 42% in July, then dropping even lower in August. This is Tesla’s sharpest decline since March 2021, when Ford jumped into the EV game with the Mustang Mach-E.

By comparison, overall EV sales in July rose 24% to 128,268 units. Tesla’s own sales in July climbed to 53,816, a 7% bump, but that couldn’t keep pace. In August, Tesla’s sales growth dropped to 3.1%, while the rest of the market accelerated by 14%.

Legacy brands offer bigger incentives and take over sales

One reason for Tesla’s plunge is the flood of EV deals from legacy automakers. Hyundai, Honda, Kia, and Toyota are all giving buyers aggressive offers, rolling out better incentives than Tesla and grabbing market share fast.

Stephanie Valdez Streaty, Cox’s director of industry insights, said, “These legacy manufacturers are all benefiting from this sense of urgency, and they’re able to have attractive offerings for their vehicles—and it’s working.”

She also added, “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.”

Tesla hasn’t introduced a new mass-market vehicle since the Cybertruck in 2023. That launch came and went without the buzz of the Model 3 or Model Y.

Even a recent refresh of the Model Y, the SUV that once became the world’s top seller, didn’t live up to expectations. Tesla is now heading into what looks like its second straight year of falling sales.

Instead of launching cheaper models like it had promised, Elon shifted focus to building humanoid robots and robotaxis. That gamble is a big one.

The board just proposed a $1 trillion compensation plan for Elon, tied to Tesla’s market value hitting $8.5 trillion over the next decade. It’s the kind of all-in bet that investors are watching closely, especially now, as the company’s main revenue stream is losing steam.

Federal tax credit deadline triggers sales rush

Right now, buyers are racing to take advantage of the $7,500 federal tax credit that ends this month. That rush boosted sales across the board in July and August, but Tesla’s growth is lagging behind. Others are simply moving faster.

While the whole EV market is climbing, Tesla is crawling. And it’s not just the lack of new models. Price cuts have become a regular tool for Tesla, but even those are losing their edge. Deep discounts might keep units moving, but they also drain profits and scare off shareholders.

As you may know, Tesla’s public image has taken a hit from Elon’s ties to politics. He helped president Donald Trump return to the White House last year, working on plans to cut down and restructure the government.

But by May, Elon had split with Trump, and left the administration altogether. That political whiplash, paired with ongoing criticism of Elon’s online behavior, has made things harder for Tesla’s branding, especially in more liberal-leaning markets.

Meanwhile, buyers are walking into showrooms and leaving with keys from Tesla’s rivals. Topojoy Biswas, a 41-year-old software worker in San Francisco, was shopping for a Toyota Camry. But after seeing the deals being offered by other EV makers, he changed course.

Volkswagen dealers offered zero down, zero interest, and free fast charging. Biswas said he walked away with a Volkswagen ID.4 instead of a Tesla Model Y. “It felt like the deal of the market,” he said. VW’s sales in July jumped more than 450% compared to June.

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