Tesla’s US EV Share Drops Below 40% for First Time Since 2017

Tesla’s share of the US electric vehicle (EV) market fell to 38% in August, according to preliminary data from Cox Automotive shared with Reuters. This is the first time Tesla has dropped below 40% since October 2017, when it was ramping up production of the Model 3. The decline underscores the increasing pressure from legacy automakers offering more competitive EV options and aggressive incentives.

In July, Tesla held 42% of the market, down from 48.7% in June—the sharpest month-over-month decline since March 2021, coinciding with Ford’s launch of the Mustang Mach-E. While Tesla’s US sales rose 7% in July to 53,816 units, the overall EV market grew 24% month-over-month, driven by a rush to claim the US$7,500 federal tax credit set to expire at the end of September. In August, Tesla’s growth slowed to 3.1%, while the broader market expanded 14%.

Stephanie Valdez Streaty, director of industry insights, Cox Automotive, said: “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.”

Tesla’s last new vehicle, the Cybertruck, launched in 2023 but has not matched the success of the Model 3 or Model Y. A recent refresh of the Model Y failed to meet market expectations. Meanwhile, Tesla has postponed or canceled plans for more affordable models, focusing instead on robotaxis and humanoid robots.

Traditional automakers—including Hyundai, Honda, Kia, Toyota, and Volkswagen—have gained ground by offering higher incentives. Volkswagen’s EV sales surged over 450% in July, aided by low lease rates and free fast-charging. “These legacy manufacturers are benefiting from this sense of urgency,” Streaty said. “And it is working.”

Tesla is also under pressure on margins due to recent price cuts, aimed at maintaining sales volumes but raising investor concerns. The company’s board has proposed a US$1 trillion compensation package for CEO Elon Musk, tied to boosting Tesla’s valuation to US$8.5 trillion over the next decade.

Musk’s public alignment with President Donald Trump earlier this year—and his departure from Trump’s administration in May after a disagreement—has further affected Tesla’s brand image. Analysts expect elevated EV sales through September, with a possible decline afterward if tax credits expire. Tesla’s strategy will be closely watched as competition in the EV market continues to intensify.