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In a notable shift, Tesla’s annual revenue experienced a downturn for the first time in 2025. The decline was attributed to the impact of President Donald Trump’s policy decisions and a growing consumer pushback against CEO Elon Musk’s political activities, which negatively affected Tesla’s electric vehicle sales.

In its latest financial report released on Wednesday, Tesla disclosed a 3 percent fall in revenue, amounting to $24.9 billion for the fourth quarter, aligning closely with analysts’ expectations of $24.8 billion. This decline contributed to a total revenue of $94.8 billion for 2025, marking a 3 percent dip from the previous year’s figures.

In an unexpected move, the company announced a $2 billion investment in Musk’s artificial intelligence venture, xAI. This decision came despite a tepid reception from shareholders, suggesting mixed feelings about the strategic direction.

While adjusted net income surpassed Wall Street’s forecasts by falling 16 percent to $1.8 billion in the fourth quarter, the company’s net income saw a significant 61 percent plunge, settling at $840 million. Despite these financial challenges, Tesla shares saw a 3 percent uptick in after-hours trading.

The company’s struggles have been exacerbated by Trump’s revocation of a series of U.S. electric vehicle incentive programs, alongside a consumer backlash in the U.S. and Europe. Many customers have expressed their discontent with Musk’s political endorsements, particularly his support for far-right political movements.

As vehicle sales have fallen, the world’s richest man has gambled the future of the company on self-driving Cybercabs and AI-enabled humanoid robots. But Tesla has not produced a single Optimus robot and is behind rivals such as Google’s Waymo in deploying vehicles in US cities without human safety drivers.

The move to link Tesla more closely to Musk’s AI group came after a nonbinding shareholder resolution in November, which garnered more votes in favour than against. But Tesla’s general counsel said at the time that a high number of abstentions meant the company would have to examine the results before deciding what to do next.

Tesla lost its position as the world’s biggest EV maker to China’s BYD last year. The US group disclosed that it had delivered 418,227 vehicles in the final quarter of 2025, down 16 per cent from the same period a year earlier and below market expectations for 423,000 vehicles.

In Europe, the sales drop-off has been even more stark with new registrations falling 21 per cent during the same period as Tesla came under pressure from an influx of new EV offerings from both Chinese and western rivals.

Income from selling regulatory credits to rivals that build more polluting vehicles fell 22 per cent year on year in the quarter to $542mn. Last year, the US government eliminated fines for non-compliance with car emissions standards, effectively neutering the trading schemes.

Despite Tesla’s weak financial performance, Musk has enjoyed a series of victories in disputes over his controversial pay awards, solidifying his control of Tesla.

Shareholders in November backed a new stock deal for Musk potentially worth $1tn if he hit a series of ambitious targets. Last month, a Delaware court reinstated a $56bn pay package that had been struck down by a judge for being excessive.

Tesla’s operating margin for the quarter fell to 5.7 per cent from 6.2 per cent.