Tesla is used to being the king of luxury EVs, having held that position for over a decade. But the carmaker’s dominance could be coming to an end. Data is now showing that rivals like BMW and Mercedes are capturing part of the market from the American automaker, especially in the most important regions, like the U.S. and EU.

But what’s going on here?

For some time now, Tesla has been experiencing a declining market share in the U.S. Earlier this year, the car company still commanded over 49% of American EV sales, but that fell to just 38% in August as rivals began offering better options. Incredibly, Tesla was in control of more than 80% of the U.S. EV market, showing that it hasn’t been able to maintain its market dominance, despite having years of first-mover advantage over the competition.

Furthermore, Tesla’s falling market share is even more worrying in the context of EV sales growth in the U.S. According to data, federal tax credits encouraged growth of 24% to July 2025, but Tesla’s sales only increased 7%, showing that it is losing out significantly to its rivals and unable to keep the pace (at least right now).

Meanwhile, BMW and Mercedes are cashing in on the current trends in the U.S. BMW saw sales of its electric vehicles rocket an incredible 80% since Q3 2023, proving that it is now offering viable options to the market and supporting its brand. Mercedes’ performance over the same period was similar, up around 66%, due to the launch and success of the electric GLC, a popular SUV.

These changes mean that Tesla is rapidly losing its position as the top player in the market. While it is still selling more luxury EVs than these other providers, it is clear that consumers are seeking variety and they want to get the best deals.

At the same time that Tesla is having difficulties in the U.S., it is also finding life hard in the EU. Sales here are also down, and local car companies are doing much better.

Most pundits aren’t aware of how severe the collapse in Tesla’s market share has been in the last couple of years. Estimates show that the automaker sold 40% fewer cars in the year to July 2025, representing a year-over-year drop of almost 50%.

The decline was highest in Germany, where local car companies are now taking up the slack. Consumers ordered 76% fewer Tesla vehicles here, preferring BMWs, Audi and Mercedes options instead. This change means that Tesla’s market share in Europe’s biggest economy is now just 4%, despite EV sales rising by more than 54%.

The news, of course, for Elon Musk’s company is catastrophic, especially given the fact that it was relying on growth in Europe to help it cement its position as a leading global firm. Now, it looks like Tesla is going to have to go back to the drawing board and rethink its strategy.

Part of the decline has to do with the consumer backlash against Elon Musk’s political activities over the last year. Many people see him as a supporter of various political parties in Germany that might not be particularly popular among the mainstream. This sort of activity is making him less respected in many parts of Europe, and that’s leading consumers to look for alternatives produced by their more established manufacturers.

However, Elon Musk isn’t the only reason Tesla is losing out to its EV rivals. This process has been underway far longer than his involvement with the Republican party.

The main driving factor pushing consumers away from Tesla is the existence of viable alternatives to the company’s vehicles. For example, BMW now operates the iX3, which has a range of up to 500 miles. It’s actually around $10,000 cheaper than the Tesla Model S, but still attracts premium buyers because of its unique design and prestige. Meanwhile, other BMW vehicles, like the i4 and iX1 are driving significant growth.

Mercedes-Benz is also making strides in the EV market and massively improving its products. For example, the GLC has a 457-mile range, which is significantly further than Tesla’s Model Y with its 387-mile range.

Furthermore, these automakers are chipping away at Tesla’s AI lead. They also have assistants that appeal to luxury buyers looking for the most convenient cars with the features that they want. Tesla is still the market leader in this regard, but the gap is often much less than people expect, which is what many are discovering in showrooms.

Of course, Tesla isn’t the only car company to struggle to maintain EV sales. Many other leading firms have been in similar positions in the past, and it could be that Tesla is just going through a rough patch.

For example, Mercedes faced severe challenges with its electric vehicles during 2024 and 2025. It saw double-digit declines in sales before fixing the GLC and reassuring buyers. For a company that is more than a century old, it’s had to go through some extreme changes to bring EVs to market.

Many consumers are also worried about the MOT implications of many of these new vehicles coming to market. BMW and others who were early entrants often offered vehicles with serious flaws that weren’t ready for everyday use on the road.

Finally, the shifting consumer sentiment, especially in the U.S., is making more people price conscious. A lot of buyers just aren’t interested in brands on vehicles if it means that they will have to pay more. Of course, this issue is mostly affecting the high end of the market, which is something that automakers are having to focus on.

To summarize, Tesla is losing ground in the luxury EV market to players like BMW and Mercedes. These established brands are now challenging Elon Musk’s decade-long dominance of the EV space.