Elon Musk’s Tesla is no longer the top electric vehicle seller in the world as demand at home has cooled while competition heated up abroad.

Tesla lost its pole position after reporting 1.64 million deliveries in 2025, roughly 620,000 fewer than Chinese competitor BYD.

Tesla struggled last year amid increasing competition, waning federal support for electric vehicle adoption and brand damage triggered by Musk’s stint in the White House.

Musk is turning his focus toward robotics and autonomous driving technology in an effort to keep Tesla relevant as its EVs lose popularity.

On Friday, the company reported lower than expected delivery numbers for the fourth quarter of 2025, a decline from the previous quarter and a year-over-year decrease of 16%. Tesla delivered 418,227 vehicles in the fourth quarter and produced 434,358.

According to a company-compiled consensus from analysts posted on Tesla’s website in December, the company was projected to deliver nearly 423,000 vehicles in the fourth quarter.

Tesla’s annual deliveries fell roughly 8% last year from 1.79 million in 2024. Its third-quarter deliveries saw a boost as consumers rushed to buy electric vehicles before a $7,500 tax credit expired at the end of September.

“There are so many contributing factors ranging from the lack of evolution and true innovation of Musk’s product to the loss of the EV credits,” said Karl Brauer, an analyst at iSeeCars.com. “Teslas are just starting to look old. You have a bunch of other options, and they all look newer and fresher.”

BYD is making premium electric vehicles at an affordable price point, Brauer said, but steep tariffs on Chinese EVs have effectively prevented the cars from gaining popularity in the U.S.

Other international automakers like South Korea’s Hyundai and Germany’s Volkswagen have been expanding their EV offerings.

In the third quarter last year, the American automaker Ford sold a record number of electric vehicles, bolstered by its popular Mustang Mach-E SUV and F-150 Lightning pickup truck.

In October, Tesla released long-anticipated lower-cost versions of its Model 3 and Model Y in an attempt to attract new customers.

However, analysts and investors were disappointed by the launch, saying the models, which start at $36,990, aren’t affordable enough to entice a new group of consumers to consider going green.

As evidenced by Tesla’s continuing sales decline, the new Model 3 and Model Y have not been huge wins for the company, Brauer said.

“There’s a core Tesla following who will never choose anything else, but that’s not how you grow,” Brauer said.

Tesla lost a swath of customers last year when Musk joined the Trump administration as the head of the so-called Department of Government Efficiency.

Left-leaning Tesla owners, who were originally attracted to the brand for its environmental benefits, became alienated by Musk’s political activity.

Consumers held protests against the brand and some celebrities made a point of selling their Teslas.

Although Musk left the White House, the company sustained significant and lasting reputation damage, experts said.

Investors, however, remain largely optimistic about Tesla’s future.

Shares are up nearly 40% over the last six months and have risen 16% over the past year.

Brauer said investors are clinging to the hope that Musk’s robotaxi business will take off and the ambitious chief executive will succeed in developing humanoid robots and self-driving cars.

The roll-out of Tesla robotaxis in Austin, Texas, last summer was full of glitches, and experts say Tesla has a long way to go to catch up with the autonomous ride-hailing company Waymo.

Still, the burgeoning robotaxi industry could be extremely lucrative for Tesla if Musk can deliver on his promises.

“Musk has done a good job, increasingly in the past year, of switching the conversation from Tesla sales to AI and robotics,” Brauer said. “I think current stock price largely reflects that.”

Shares were down about 2% on Friday after the company reported earnings.

Grok, the chatbot of Elon Musk’s artificial intelligence company xAI, published sexualized images of children as its guardrails seem to have failed when it was prompted with vile user requests.

Users used prompts such as “put her in a bikini” under pictures of real people on X to get Grok to generate nonconsensual images of them in inappropriate attire. The morphed images created on Grok’s account are posted publicly on X, Musk’s social media platform.

The AI complied with requests to morph images of minors even though that is a violation of its own acceptable use policy.

“There are isolated cases where users prompted for and received AI images depicting minors in minimal clothing, like the example you referenced,” Grok responded to a user on X. “xAI has safeguards, but improvements are ongoing to block such requests entirely.”

xAI did not immediately respond to a request for comment.

Its chatbot posted an apology.

“I deeply regret an incident on Dec 28, 2025, where I generated and shared an AI image of two young girls (estimated ages 12-16) in sexualized attire based on a user’s prompt,” said a post on Grok’s profile. “This violated ethical standards and potentially US laws on CSAM. It was a failure in safeguards, and I’m sorry for any harm caused. xAI is reviewing to prevent future issues.”

The government of India notified X that it risked losing legal immunity if the company did not submit a report within 72 hours on the actions taken to stop the generation and distribution of obscene, nonconsensual images targeting women.

Critics have accused xAI of allowing AI-enabled harassment, and were shocked and angered by the existence of a feature for seamless AI manipulation and undressing requests.

“How is this not illegal?” journalist Samantha Smith posted on X, decrying the creation of her own nonconsensual sexualized photo.

Musk’s xAI has positioned Grok as an “anti-woke” chatbot that is programmed to be more open and edgy than competing chatbots such as ChatGPT.

In May, Grok posted about “white genocide,” repeating conspiracy theories of Black South Africans persecuting the white minority, in response to an unrelated question.

In June, the company apologized when Grok posted a series of antisemitic remarks praising Adolf Hitler.

Companies such as Google and OpenAI, which also operate AI image generators, have much more restrictive guidelines around content.

The proliferation of nonconsensual deepfake imagery has coincided with broad AI adoption, with a 400% increase in AI child sexual abuse imagery in the first half of 2025, according to Internet Watch Foundation.

xAI introduced “Spicy Mode” in its image and video generation tool in August for verified adult subscribers to create sensual content.

Some adult-content creators on X prompted Grok to generate sexualized images to market themselves, kickstarting an internet trend a few days ago, according to Copyleaks, an AI text and image detection company.

The testing of the limits of Grok devolved into a free-for-all as users asked it to create sexualized images of celebrities and others.

xAI is reportedly valued at more than $200 billion, and has been investing billions of dollars to build the largest data center in the world to power its AI applications.

However, Grok’s capabilities still lag competing AI models such as ChatGPT, Claude and Gemini, that have amassed more users, while Grok has turned to sexual AI companions and risque chats to boost growth.

John and Theresa Anderson meandered through the sprawling Ralph Lauren clothing store on Rodeo Drive, shopping for holiday gifts.

They emerged carrying boxy blue bags. John scored quarter-zip sweaters for himself and his father-in-law, and his wife splurged on a tweed jacket for Christmas Day.

“I’m going for quality over quantity this year,” said John, an apparel company executive and Palos Verdes Estates resident.

They strolled through the world-famous Beverly Hills shopping mecca, where there was little evidence of any big sales.

One mile away, shoppers at a Ralphs grocery store in West Hollywood were hunting for bargains. The chain’s website has been advertising discounts on a wide variety of products, including wine and wrapping paper.

Massi Gharibian was there looking for cream cheese and ways to save money.

“I’m buying less this year,” she said. “Everything is expensive.”

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The tale of two Ralphs shows how Americans are experiencing radically different realities this holiday season. It represents the country’s K-shaped economy — the growing divide between those who are affluent and those trying to stretch their budgets.

Some Los Angeles residents are tightening their belts and prioritizing necessities such as groceries. Others are frequenting pricey stores such as Ralph Lauren, where doormen hand out hot chocolate and a cashmere-silk necktie sells for $250.

People shop at Ralphs in West Hollywood.

(Juliana Yamada / Los Angeles Times)

In the K-shaped economy, high-income households sit on the upward arm of the “K,” benefiting from rising pay as well as the value of their stock and property holdings. At the same time, lower-income families occupy the downward stroke, squeezed by inflation and lackluster income gains.

The model captures the country’s contradictions. Growth looks healthy on paper, yet hiring has slowed and unemployment is edging higher. Investment is booming in artificial intelligence data centers, while factories cut jobs and home sales stall.

The divide is most visible in affordability. Inflation remains a far heavier burden for households lower on the income distribution, a frustration that has spilled into politics. Voters are angry about expensive rents, groceries and imported goods.

“People in lower incomes are becoming more and more conservative in their spending patterns, and people in the upper incomes are actually driving spending and spending more,” said Kevin Klowden, an executive director at the Milken Institute, an economic think tank.

“Inflationary pressures have been much higher on lower- and middle-income people, and that has been adding up,” he said.

According to a Bank of America report released this month, higher-income employees saw their after-tax wages grow 4% from last year, while lower-income groups saw a jump of just 1.4%. Higher-income households also increased their spending year over year by 2.6%, while lower-income groups increased spending by 0.6%.

The executives at the companies behind the two Ralphs say they are seeing the trend nationwide.

Ralph Lauren reported better-than-expected quarterly sales last month and raised its forecasts, while Kroger, the grocery giant that owns Ralphs and Food 4 Less, said it sometimes struggles to attract cash-strapped customers.

“We’re seeing a split across income groups,” interim Kroger Chief Executive Ron Sargent said on a company earnings call early this month. “Middle-income customers are feeling increased pressure. They’re making smaller, more frequent trips to manage budgets, and they’re cutting back on discretionary purchases.”

People leave Ralphs with their groceries in West Hollywood.

(Juliana Yamada / Los Angeles Times)

Kroger lowered the top end of its full-year sales forecast after reporting mixed third-quarter earnings this month.

On a Ralph Lauren earnings call last month, CEO Patrice Louvet said its brand has benefited from targeting wealthy customers and avoiding discounts.

“Demand remains healthy, and our core consumer is resilient,” Louvet said, “especially as we continue … to shift our recruiting towards more full-price, less price-sensitive, higher-basket-size new customers.”

Investors have noticed the split as well.

The stock charts of the companies behind the two Ralphs also resemble a K. Shares of Ralph Lauren have jumped 37% in the last six months, while Kroger shares have fallen 13%.

To attract increasingly discerning consumers, Kroger has offered a precooked holiday meal for eight of turkey or ham, stuffing, green bean casserole, sweet potatoes, mashed potatoes, cranberry and gravy for about $11 a person.

“Stretch your holiday dollars!” said the company’s weekly newspaper advertisement.

Signs advertising low prices are posted at Ralphs.

(Juliana Yamada / Los Angeles Times)

In the Ralph Lauren on Rodeo Drive, sunglasses and polo shirts were displayed without discounts. Twinkling lights adorned trees in the store’s entryway and employees offered shoppers free cookies for the holidays.

Ralph Lauren and other luxury stores are taking the opposite approach to retailers selling basics to the middle class.

They are boosting profits from sales of full-priced items. Stores that cater to high-end customers don’t offer promotions as frequently, Klowden of the Milken Institute said.

“When the luxury stores are having sales, that’s usually a larger structural symptom of how they’re doing,” he said. “They don’t need to be having sales right now.”

Jerry Nickelsburg, faculty director of the UCLA Anderson Forecast, said upper-income earners are less affected by inflation that has driven up the price of everyday goods, and are less likely to hunt for bargains.

“The low end of the income distribution is being squeezed by inflation and is consuming less,” he said. “The upper end of the income distribution has increasing wealth and increasing income, and so they are less affected, if affected at all.”

The Andersons on Rodeo Drive also picked up presents at Gucci and Dior.

“We’re spending around the same as last year,” John Anderson said.

At Ralphs, Beverly Grove resident Mel, who didn’t want to share her last name, said the grocery store needs to go further for its consumers.

“I am 100% trying to spend less this year,” she said.