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Tesla saw its slice of California’s car market drop sharply last year, marking a significant setback for the electric vehicle company in one of its most important markets.
The carmaker’s slice of new vehicle registrations in California fell to 9.9% in 2025, down from 11.6% the previous year, based on numbers from Experian that were shared by the California New Car Dealers Association. This drop pushed Tesla down to third place among all car brands sold in the state. Just a year before, the company held second place, behind only Toyota.
The decline was more than three times larger than the drop experienced by Dodge, which is owned by Stellantis.
Tesla’s troubles in California mirror challenges the company faces worldwide. The vehicle maker is dealing with an older product lineup and a Cybertruck that hasn’t sold well. At the same time, traditional automakers are rolling out newer electric vehicles that compete directly with Tesla’s offerings. The end of federal tax credits for electric vehicle buyers has also hurt sales, which were already weakening. On top of these business challenges, some customers have turned away from the brand because of CEO Elon Musk’s involvement in politics.
The actual number of Tesla vehicles registered in California came in at fewer than 180,000 last year, a drop from almost 203,000 in 2024. This decline played a part in California’s overall electric vehicle market pulling back, with total zero-emission vehicle registrations falling by roughly 7,300 cars to just over 378,000.
Despite these losses, Tesla’s best-selling models still ranked high on the state’s list. The Model Y sport utility vehicle held onto its position as California’s top-selling electric vehicle and became the number one light truck across all types. The Model 3 sedan came in as the state’s second most popular passenger car, finishing just behind the Toyota Camry.
California Governor Gavin Newsom, a Democrat, is now asking for $200 million to bring back tax rebates for people buying electric vehicles in the state. The goal is to help boost demand for these cars.
Robotaxi service goes driverless
In separate news, Tesla has started offering robotaxi rides without human safety drivers in Austin, marking a major step forward for the company. The service, which launched seven months ago, previously required people to sit in the front seats to monitor the vehicles.
Just started Tesla Robotaxi drives in Austin with no safety monitor in the car.
Congrats to the @Tesla_AI team!
If you’re interested in solving real-world AI, which is likely to lead to AGI imo, join Tesla AI. Solving real-world AI for Optimus will be 100X harder than cars. https://t.co/OnP8gredWD
— Elon Musk (@elonmusk) January 22, 2026
Musk announced the development Thursday on X, posting a video from a former Tesla artificial intelligence engineer. Last month, the CEO had revealed that testing without anyone in the cars was underway.
Ashok Elluswamy, who leads Tesla’s AI efforts, explained in another post that “a few” vehicles in the robotaxi fleet would operate without supervision. He added that the number of vehicles running without safety monitors would grow over time.
Musk has been talking more about Tesla’s AI work and robotaxi plans as the company deals with falling vehicle sales. While offering rides without human backups might improve public perception of the driving technology, Tesla told regulators that its small group of cars operating in Texas’s capital city were involved in eight crashes over six months last year.
Tesla’s stock price jumped after the announcement, rising as much as 4% by 2:30 p.m. in New York. Shares of Uber Technologies and Lyft dropped more than 3% during the day before recovering somewhat.
Missed predictions and limited reach
Throughout 2025, Musk repeatedly promised that Tesla would offer unsupervised rides before the year ended. Some of his other predictions missed by a wider margin. In July, he suggested that half of Americans might be able to access autonomous Tesla rides by the end of the year.
Austin remains the only city where Tesla provides robotaxi rides. The company began a taxi service in the San Francisco Bay area last year but hasn’t requested permission to test self-driving vehicles without safety drivers in California.
Tesla’s playing catch-up with Alphabet’s Waymo, which got driverless rides going in Phoenix back in late 2018. Waymo’s now charging passengers for driverless rides across thousands of vehicles in Austin, Los Angeles, San Francisco, Atlanta and Miami.
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