Nanjing, China – March 2, 2026 – A new energy vehicle is parked outside a BYD store on March 2, 2026 in Nanjing, Jiangsu Province, China. (Photo credit: CFOTO/Future Publishing via Getty Images)
Photo | Future Publishing | Getty Images
BYD lost ground to domestic competitors in the first two months of this year as demand across China’s electric vehicle market slowed.
The world’s largest electric car maker’s total sales in January and February 2026 were down about 36% compared to the previous year. The figure was adjusted to take into account the seasonal sales slowdown during the two-week Lunar New Year holiday in mid-February.
Other Chinese EV automakers’ combined sales increased across the board in January and February, with Leap Motor and Xiaomi both reporting significant year-on-year sales increases.
Leapmotor recorded sales of 60,126 units in January and February this year, an increase of 19% year-on-year. Xiaomi sold over 59,000 units during the same period, marking a 48% year-on-year jump.
Nio and Geely’s Zeekr in particular saw their combined sales jump 77% and about 84% year over year in January and February, respectively, according to CNBC calculations.
Conversely, Xpeng reported the automaker’s largest year-over-year decline in total sales, with total deliveries of 35,267 units, down approximately 42% year-over-year. Li Automobile’s deliveries also decreased by nearly 4% to 54,089 units.
China’s level playing field
Beyond seasonality, BYD’s shrinking lead in domestic sales suggests that the playing field for EVs in China is leveling as competitors’ products become increasingly attractive to consumers.
Leon Chen, head of the mobility practice at management consulting firm YCP, said, “BYD’s lead is realistic, but it is shrinking… A complete reversal is unlikely in the short term, but the trend is for its domestic market share to shrink.”
The EV giant cornered about 26-34% of China’s new energy vehicle market in 2024-2025, but other automakers such as Geely and Leap Motor have increased their position by attacking some of BYD’s core core markets, Chen added.
Rival Chinese EV automakers are trying to erode BYD’s advantage by cramming as much value into their products as possible while maintaining competitive price points, a practice known as involution.
Xiaomi’s new SUV YU7 became the best-selling passenger car in China in January, selling more than twice as many cars as Tesla’s Model Y. The latter was the best-selling model last month.
Additionally, the reinstatement of the 5% purchase tax on new energy vehicles announced at the end of 2025 may also leave a “demand vacuum” for BYD into the new year as consumers rush to purchase before the tax takes effect, Chen said.
But “I think it’s becoming completely difficult for companies to differentiate themselves,” said Abby Tu, principal research analyst at S&P Global Mobility.
Many of BYD’s competitors are also trying to carve a niche in China’s huge EV market by asserting themselves in the high-end luxury segment, Tu added.
BYD has responded to fierce domestic competition by primarily focusing on overseas markets. In February, the company’s exports exceeded domestic sales for the first time, according to CNBC calculations.
“BYD’s hedge is exports. (The company’s) overseas sales exceeded 1 million units for the first time in 2025. This buffer is something that purely domestic rivals cannot match,” Chen said.
Domestically, Chen said consumers will see new product launches later this year, focusing on the company’s new batteries.
“Last year’s free rollout of ‘Eye of God’ (an advanced driver assistance system feature) facilitated a shift in demand without triggering price competition. We expect a similar move to be imminent with Blade Battery 2.0 and second-generation flash charging,” he said.
encourage independence
China’s EV market continues to suffer from slowing demand, despite increasing sales for several automakers. This is at least partly due to the imposition of a 5% purchase tax on new energy vehicles, which were previously fully exempt from the 10% tax.
By reducing incentives for buying EVs, Chinese regulators are signaling a “deliberate normalization” of the country’s EV market, said Lawrence Loh, a professor at the National University of Singapore’s Business School.
Mr Lo said the move was aimed at encouraging Chinese automakers to become more independent.
But analysts say this reduction in financial incentives could dampen demand for new EV purchases, as the market expects costs to always be passed on to consumers.
“For example, a 5% tax on a car that costs $200,000 is still something to think about because it adds $10,000 (additionally) to the cost of purchase,” said S&P Global Mobility’s Tu.
But some automakers are trying to boost slowing domestic demand by offsetting some of the economic costs for consumers, Tu added.
Chinese automakers have relied on creative financing schemes to stimulate consumer demand.
CNBC previously reported that Tesla began offering consumers five-year interest-free loans or seven-year “ultra-low” interest loans. According to its official Weibo account, Xiaomi later announced a similar offer offering a seven-year “low-interest financing” contract.
