Tesla Loses Biggest Market Share In California As Toyota Climbs To No. 2

Full-year 2025 registration data from the California New Car Dealers Association confirms what quarterly reports suggested all year: Tesla suffered the steepest market share decline of any automaker in America’s largest EV market. The company’s share of all vehicles registered in California fell from 11.6% in 2024 to 9.9% in 2025, a 1.7-percentage-point drop that was more than triple the decline of the next-worst performer.

The data, sourced from Experian Automotive and published by Bloomberg, shows Tesla slipping from No. 2 to No. 3 among all automakers in California, now trailing only Toyota. In raw numbers, Tesla registered fewer than 180,000 vehicles in the state last year, down from almost 203,000 in 2024. That’s a decline of roughly 23,000 units, or about 11%.

• The number: Tesla’s California market share fell to 9.9% in 2025, down from 11.6% in 2024, the largest decline of any major automaker.
• The ranking shift: Tesla dropped to No. 3 overall in California, trailing Toyota, which gained approximately 1.5 percentage points of market share.
• The context: Total zero-emission vehicle registrations in California fell by about 7,300 units to just over 378,000, meaning the entire EV market contracted while Tesla’s share within it also shrank.

Tesla’s California collapse follows eight consecutive quarters of decline

The full-year 2025 data is the cumulative result of a trend EVXL has tracked since early 2025. Tesla’s California registrations dropped in every quarter, with the company’s Q2 2025 marking its seventh consecutive quarterly decline in the state. The company faced mounting headwinds throughout the year: an aging vehicle lineup, intensifying competition from other EV makers, and consumer backlash tied to CEO Elon Musk’s political activities.

A Yale University study published in October 2025 quantified the damage. Researchers concluded Tesla would have sold between 1 million and 1.26 million additional vehicles from October 2022 through April 2025 without what they called the “Musk partisan effect.” The study found California would have met its 2026 zero-emissions vehicle targets if not for Tesla’s politically driven sales losses.

The loss of the $7,500 federal EV tax credit on September 30, 2025, compounded Tesla’s problems. While buyers rushed to purchase EVs before the deadline, the post-credit market reality hit hard. Full-year 2025 EV sales data showed Q4 collapsing 36% year-over-year industrywide once the subsidy disappeared.

Tesla still dominates the EV segment despite overall share losses

The Bloomberg data includes an important caveat that gets buried in the headline numbers. Despite losing ground in the broader auto market, Tesla’s most popular models remain at the top of their respective categories. The Modelo Y was the best-selling EV in California in 2025 and ranked as the No. 1 light truck of any type in the state. The Modelo 3 was the second-best-selling passenger car, trailing only the Toyota Camry.

This creates an odd dynamic. Tesla is simultaneously losing overall market share while maintaining dominance in the EV category. The explanation lies in the math: California’s EV market contracted slightly while the broader vehicle market saw gains from traditional automakers and hybrids. Tesla’s decline pulled down the entire zero-emission market with it, given the company’s outsized share of EV sales.

Toyota and Hyundai gained ground while Tesla and Dodge lost

The Experian data shows a clear divergence among automakers in California. Toyota led all brands with approximately 1.5 percentage points of market share gained year-over-year. Hyundai y Ford each picked up roughly half a percentage point. On the losing side, Dodge y Subaru each dropped about half a point, but Tesla’s 1.7-point decline was more than three times larger than any other brand’s loss.

Toyota’s California gains fit a pattern we’ve tracked nationally. The company announced a $912 million investment in U.S. hybrid production just six weeks after the federal EV tax credit expired, betting that hybrids would capture buyers who couldn’t afford full EVs without subsidies. That bet appears to be paying off in California, where hybrid sales have surged.

Newsom seeks $200 million to revive California EV rebates

California Governor Gavin Newsom is now seeking $200 million to resume offering state tax rebates for EV purchases, according to Bloomberg. The move acknowledges that the loss of federal incentives has created an affordability crisis for EV adoption. California previously offered up to $7,000 in state rebates before funding ran out.

The timing is telling. When Congress passed legislation terminating the federal EV tax credits in July 2025, analysts predicted exactly this scenario: state governments scrambling to fill the incentive gap. A Harvard study projected that ending federal credits would reduce EV market penetration by 6% by 2030.

Whether $200 million will be enough to reverse Tesla’s slide—or California’s broader EV retreat—remains to be seen. The state’s zero-emission vehicle mandate was effectively blocked by the Trump administration in June 2025, removing the regulatory pressure that had driven automakers to prioritize EVs.

EVXL’s Take

This data validates everything we warned about throughout 2025. Back in May, we reported Tesla’s Q1 California sales had plummeted 21% while competitors rose 14%. In July, we documented Tesla’s seventh consecutive quarterly decline in the state. The full-year numbers confirm the pattern wasn’t a blip. It was a structural shift.

The combination of Musk’s political activities, the federal tax credit expiration, and an aging lineup created a perfect storm. The Yale study’s finding that Tesla lost over 1 million sales to the “Musk partisan effect” alone shows how much brand damage accumulated. California buyers, historically Tesla’s most loyal demographic, abandoned the brand in numbers that reshaped the state’s entire auto market.

What’s striking is that Tesla’s models remain popular. The Model Y and Model 3 are still category leaders. But when your CEO becomes a lightning rod in the most politically progressive EV market in America, category leadership isn’t enough to maintain overall market share. Toyota didn’t win California by building better EVs. They won by not alienating half their potential customer base.

Expect this trend to continue through 2026. The post-subsidy EV market has fundamentally restructured, and Newsom’s $200 million won’t come close to replacing the billions in federal credits that disappeared in September. Tesla’s California market share will likely stabilize somewhere below 10%, assuming Musk doesn’t create new controversies. Given his track record, that’s a big assumption.

Editorial Note: This article was researched and drafted with the assistance of AI to ensure technical accuracy and archive retrieval. All insights, industry analysis, and perspectives were provided exclusively by Haye Kesteloo and our other EVXL authors, editors, and YouTube partners to ensure the “Human-First” perspective our readers expect.

Frequently Asked Questions

How much market share did Tesla lose in California in 2025?

Tesla’s share of all vehicles registered in California fell from 11.6% in 2024 to 9.9% in 2025, a decline of 1.7 percentage points. This was more than three times larger than the next-biggest decliner, Dodge.

What is Tesla’s ranking among California automakers now?

Tesla dropped from No. 2 to No. 3 among all automakers in California in 2025, now trailing only Toyota. The company registered fewer than 180,000 vehicles in the state, down from almost 203,000 in 2024.

Is the Tesla Model Y still the best-selling EV in California?

Yes. Despite Tesla’s overall market share decline, the Model Y remained the best-selling EV in California in 2025 and was also the No. 1 light truck of any type in the state. The Model 3 was the second-best-selling passenger car, trailing only the Toyota Camry.

Why did Tesla lose so much market share in California?

Multiple factors contributed: consumer backlash against CEO Elon Musk’s political activities, the expiration of the $7,500 federal EV tax credit on September 30, 2025, an aging vehicle lineup, and growing competition from other EV makers. A Yale University study found the “Musk partisan effect” alone cost Tesla over 1 million sales nationally.

What is California doing to boost EV sales?

Governor Gavin Newsom is seeking $200 million to resume state tax rebates for EV purchases. This follows the expiration of federal EV tax credits in September 2025 and the Trump administration’s blocking of California’s zero-emission vehicle mandate.