The electric vehicle business is slowing.
It's a risk for Tesla and one reason the company is pivoting away from cars and into physical AI applications such as robo-taxis and robots.
Sunday, Chinese EV makers Li Auto, NIO, and XPeng reported January sales. Li sold the most, with 27,668 vehicles, down about 8% from a year ago.
NIO had a strong month, following a very weak January 2025, with 27,182 vehicles sold, up almost 100% from last year. By comparison, NIO sold 13,863 cars in January 2025, a dip of 55% compared with December 2024. NIO sales were off by less than 45% from December 2025.
The final months of the year are typically strong, with buyers rushing to beat any changes in EV incentives. Several things have changed for Chinese EV buyers in the new year, including the end of the full purchase tax exemption for electrified vehicles.
XPeng sold 20,011 vehicles, down 34% from a year ago.
Combined, the three EV makers sold 74,861, up 1% from last year. That's the slowest growth since January 2023, when the trio sold 28,865, down 17%.
Slowing Chinese sales follow cratering U.S. sales. Americans bought 234,171 EVs in the fourth quarter, down 36% from a year earlier. The ending of the $7,500 purchase tax credit in September led to the decline.
Tesla sold 138,000 vehicles to Americans in the fourth quarter. That was a relative win. Sales were down only 15% year over year, and Tesla's market share jumped about 59%, up almost 15 percentage points year over year.
In Europe, EV sales remained strong in 2025 at 2.6 million vehicles, up 30% from the prior year. Tesla, however, has faced more competition. It sold 238,656 vehicles in Europe, down 27%.
The sales slowdown is one reason CEO Elon Musk is betting big on AI. Tesla's fourth-quarter earnings conference call was dominated by questions about AI, including the expansion of Tesla's robo-taxi business, which it launched in Austin, Texas, in June. Tesla plans to be operating in nine cities by the middle of 2026.
Tesla also plans to ramp up its capital spending to $20 billion in 2026 to fund its AI ambitions. That is a big step. Tesla spent closer to $9 billion on new plants and equipment in 2025.
It's a big bet Tesla investors expect to pay off. Through Friday trading, Tesla was valued at more than 200 times estimated 2026 earnings, the most expensive stock in the S&P 500, according to FactSet .
That valuation is based mainly on AI and not the prospect of growing EV sales.
