In a pivotal year for the electric vehicle leader, tesla california performance weakened even as the company pushed ahead with fully driverless robotaxis in Austin.
Market share decline in a key US stronghold
Tesla saw its share of California‘s new car market contract sharply in 2025, underscoring mounting pressure in one of its most important regions. The brand’s market share slipped to 9.9% from 11.6% in 2024, according to Experian data shared by the California New Car Dealers Association.
This decline pushed Tesla down to third place among all car brands sold in the state, after previously holding second position behind only Toyota. Moreover, the drop was more than three times larger than the reduction experienced by Dodge, owned by Stellantis, highlighting how sharply the company lost ground.
In absolute terms, the number of vehicles registered in California fell to fewer than 180,000, down from almost 203,000 in 2024. That shift contributed to a broader pullback in the state’s zero-emission segment, with total registrations of all electric vehicles falling by roughly 7,300 units to just over 378,000.
Legacy models, policy shifts and political backlash
The company’s struggles in California mirror challenges it faces in other global markets. Tesla is working with an aging product lineup and a Cybertruck that has not met early sales expectations. Meanwhile, legacy automakers are bringing new electric models to market that directly challenge its long-dominant offerings.
Moreover, the expiration of federal tax credits for many buyers of electric vehicles has removed a key financial incentive, weighing on demand that was already slowing. On top of these economic factors, some customers have distanced themselves from the brand over the CEO’s high-profile political involvement, which has added another layer of headwind.
The state’s top-selling models still underline Tesla’s presence despite the contraction. The Model Y sport utility vehicle remained California‘s best-selling electric vehicle and became the number one light truck overall. The Model 3 sedan finished as the state’s second most popular passenger car, coming in just behind the Toyota Camry, a long-standing benchmark in the segment.
Policy response and incentives for buyers
In response to the softer zero-emission market, Governor Gavin Newsom is seeking $200 million to restore tax rebates for residents purchasing electric vehicles. The proposal aims to revive demand in the california electric market and support the state’s emissions goals. However, it remains to be seen how quickly such incentives could offset broader economic and competitive pressures.
Robotaxi service goes fully driverless in Austin
While the company wrestles with a shrinking foothold in California, it is moving more aggressively on autonomous mobility in Texas. In Austin, Tesla robotaxis are now providing rides without human safety drivers, a major operational shift for the service launched seven months ago. Previously, staff were required to sit in the front seats to monitor the vehicles.
The CEO announced the change on X, posting a video from a former Tesla artificial intelligence engineer to showcase the development. Last month, he had already disclosed that testing without any occupants in the front seats was underway, signaling that a wider deployment was imminent.
Ashok Elluswamy, who leads Tesla’s AI division, said that “a few” vehicles in the Austin robotaxi fleet would initially run without direct supervision. However, he indicated that the number of cars operating without safety monitors is expected to grow over time as the company gains more confidence in the system.
Safety record and market reaction
The move toward unsupervised operations is designed to strengthen public confidence in the technology and demonstrate progress in real-world autonomy. That said, Tesla disclosed to regulators that its limited fleet of driverless cars in Texas’s capital city was involved in eight crashes over a six-month period last year.
Financial markets responded quickly to the update. Tesla’s stock rose as much as 4% by mid-afternoon in New York following the announcement. In contrast, shares of Uber Technologies and Lyft fell more than 3% during the session before staging a partial recovery later in the day.
Missed timelines and limited geographic reach
Throughout 2025, the CEO repeatedly assured investors and customers that the company would begin offering unsupervised rides before year-end. In July, he even suggested that as many as half of Americans might gain access to autonomous rides in Tesla vehicles by the close of the year. However, those predictions have not yet materialized on a national scale.
At present, Austin is still the only city where the full tesla california robotaxi austin experience is available, even though the brand began a taxi service in the San Francisco Bay Area last year. The company has not requested permission to operate fully driverless tests in California, where regulations for autonomous vehicles are more established and often stricter.
Meanwhile, Tesla remains behind Alphabet‘s Waymo, which introduced paid, driverless rides in Phoenix back in late 2018. Waymo now charges passengers for autonomous trips across thousands of vehicles deployed in Austin, Los Angeles, San Francisco, Atlanta and Miami, underscoring the competitive gap in large-scale deployment.
Overall, Tesla enters the next phase of its strategy balancing a pronounced market share drop in California with aggressive bets on driverless technology in Texas, as regulators, rivals and investors closely watch whether the company can convert its autonomous vision into sustainable growth.