Tesla's Slowing Deliveries Are Stress-Testing EV ETF Design

Tesla Inc's (NASDAQ:TSLA) second consecutive year of declining vehicle deliveries has raised new questions about the company’s position in electric vehicle (EV) ETFs. This is especially notable since many of these funds gained value while Tesla shares dropped after the sales update.

In 2025, Tesla delivered around 1.63 million vehicles worldwide, roughly 9% down on-year. Fourth-quarter deliveries fell much more than analysts had anticipated. Following the New Year holiday, the stock dropped over 2%. However, several EV-focused ETFs, such as the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV), iShares Electric Vehicles and Driving Technology ETF (NYSE:IDRV), and KraneShares Electric Vehicles & Future Mobility ETF (NYSE:KARS), ended the session with gains.

This difference highlights a subtle but important change in how EV ETFs are performing. Tesla has long been a central stock for the EV theme. However, instead of serving solely as stand-ins for Tesla, these funds are increasingly capturing a wider range of global EV factors, from battery supply chains to regional demand trends. Leadership in electric vehicles is no longer limited to one company.

Competition from China has become a critical factor. In 2025, BYD surpassed Tesla as the largest EV seller globally, helped by its size, pricing flexibility, and robust domestic demand. ETFs with global reach, like KARS, include investments in Chinese EV makers and suppliers. This exposure can help balance out weaknesses in U.S.-focused companies when Tesla struggles.

Additionally, U.S.-listed EV ETFs are influenced more by policy changes than just individual company stories. The end of the federal EV tax credit led to a surge in demand during the third quarter, followed by a significant slowdown in the fourth quarter. This volatility shows how EV ETFs are now reactive to incentive cycles and regional policy changes, not just to technology adoption.

Tesla's effort to redefine itself as an AI and robotics firm adds another layer of complexity. While this narrative may attract equity investors, most EV ETFs focus on businesses whose revenues depend on vehicle production, battery manufacturing, and components. Therefore, Tesla's AI goals do little to protect EV-themed funds from fluctuations in auto sales and pricing pressures.

The rise of EV ETFs, even while Tesla’s stock has declined, suggests that the theme is becoming more diverse in terms of geography, business models, and revenue sources. For investors, this could be seen as a positive development, indicating that EV ETFs are evolving into a broader story, even as Tesla’s challenges continue to influence the discussion.

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