Tesla's dominance in the U.S. electric vehicle (EV) market has slipped to new lows, with Cox Automotive reporting that the carmaker accounted for just 38% of total EV sales in August.
It is the first time since October 2017 that Tesla's share has fallen under 40%, underscoring the challenges facing Elon Musk's company in a maturing and increasingly competitive market.
Cox Automotive and Tesla declined to comment when contacted, but the figures represent a striking decline from Tesla's peak, when it controlled more than 80% of the U.S. EV market.
The decline comes against the backdrop of Tesla's latest earnings report, which missed expectations on both vehicle deliveries and revenue. The company posted its steepest year-over-year revenue decline in the past decade, attributing the downturn to a "sustained uncertain macroeconomic environment" shaped by shifting tariffs, unclear fiscal policy impacts, and volatile political sentiment.
Musk has warned that Tesla may face "a few rough quarters," especially as the federal EV tax credit expires at the end of September. Nonetheless, he maintains that Tesla's financials will look "very compelling" by late 2026. In a May interview, when pressed on reversing the slump, Musk insisted the turnaround had "already" begun.
Internally, Tesla has experienced significant shakeups. Musk has taken direct control of U.S. and European sales after the departure of his deputy, Omead Afshar, Bloomberg reported. The Wall Street Journal added that Tesla's top North America sales executive also left the company in July.
Meanwhile, Musk has been repositioning Tesla beyond its core car business. The company recently unveiled its fourth "Master Plan," in which Musk suggested that as much as 80% of Tesla's long-term value could stem from its humanoid robot Optimus rather than vehicles.
"Tesla is positioning itself as a robotics and AI company," said Stephanie Valdez Streaty, Cox's director of industry insights. "But when you're a car company, when you don't have new products, your share will start to decline."
Despite the turbulence, Tesla's shareholders continue to show faith in Musk's leadership. On Friday, Tesla's board announced an unprecedented $1 trillion compensation package designed to secure his stewardship as the company reinvents itself as both an AI and robotics powerhouse. The move highlights investor confidence that Musk remains central to Tesla's long-term strategy, even as short-term performance falters.
The EV landscape has shifted dramatically. U.S. rivals Ford, General Motors, Hyundai, and Kia are aggressively expanding their EV offerings at competitive price points. Globally, Tesla has also ceded ground to Chinese giant BYD, which has surged ahead on the back of government support and a wider product portfolio.
Tesla, in turn, is working on a cheaper vehicle that could boost sales momentum after the $7,500 U.S. federal tax credit expires this month. For now, however, its relatively narrow lineup leaves it exposed as competitors flood the market with more choices.
Tesla's U.S. slip mirrors broader global trends. In Europe, Volkswagen and Stellantis have steadily chipped away at Tesla's share, while in China, BYD has pulled ahead decisively. The August figures show that Tesla's stronghold in the U.S. is no longer immune to the same pressures reshaping global EV markets.
As Tesla charts its course into 2026, analysts have painted two divergent:
Tesla successfully launches its cheaper mass-market EV in time to capture buyers priced out of its current lineup. This allows the company to recover U.S. market share while maintaining profitability. Simultaneously, Optimus -- Musk's humanoid robot -- gains traction in commercial and industrial markets, proving Tesla's pivot to AI and robotics is more than aspirational.
By late 2026, the dual strength of a revitalized car lineup and a fast-growing robotics division could deliver on Musk's promise of "very compelling" financials. Shareholders who backed his $1 trillion package would be vindicated.
Tesla delays or struggles to deliver the affordable EV, leaving it vulnerable to rivals that flood the market with competitive models. Without new products, U.S. market share continues to slide below 30% as buyers migrate to competitors. Meanwhile, Optimus remains in the prototype stage with little commercial application, casting doubt on Musk's claim that it will represent 80% of Tesla's value.
By 2026, Tesla risks being seen as overstretched -- too distracted by robotics and AI ambitions to defend its car business, the foundation of its brand.