BYD sales plunge in first two months of 2026 as EV giant loses more ground to rivals

BYD lost ground to its domestic rivals in the first two months of the year as overall demand in China’s electric vehicle market slowed.

The world’s largest electric vehicle maker’s combined January and February sales volume in 2026 was down roughly 36% from a year earlier. The figure was adjusted for a seasonal sales slowdown during the two-week Chinese New Year holiday in mid-February.

Combined January and February sales figures from China’s other EV automakers generally rose across the board, with both Leapmotor and Xiaomi reporting significant year-over-year increases in sales over the same period a year earlier.

Leapmotor scored 60,126 sales in January and February this year, a 19% jump year-over-year. Xiaomi sold over 59,000 units in the same period, up 48% year-on-year.

The Neo and Geely’s Zekr, in particular, saw combined sales for January and February rise 77% and nearly 84% year-over-year, respectively, according to CNBC’s calculations.

Conversely, Xpeng reported the largest year-over-year decline in its consolidated sales, with the automaker’s combined deliveries at 35,267 deliveries, a decline of roughly 42% from the previous year. Li Auto’s deliveries also fell by around 4% to 54,089 sales.

Regardless of seasonality, BYD’s thinning lead in domestic sales points to a leveling of China’s EV playing field, as offerings from its rivals grow more attractive to consumers.

“BYD’s lead is real but narrowing… A full reversal is unlikely in the near future, but domestic share contraction is the direction of travel,” said Lian Cheng, head of mobility practice at management consulting firm YCP.

The EV giant has cornered about 26-34% of China’s new energy vehicle market in 2024-2025, while other automakers such as Geely and Leapmotor gained ground by attacking BYD’s mid-market segments, Cheng added.

Rival Chinese EV automakers have tried to erode BYD’s dominance by packing as much value as possible into their offerings, while still maintaining competitive price points – a process known as involution.

Xiaomi’s new YU7 SUV was the best-selling passenger vehicle in China in January, selling twice as much as Tesla’s Model Y cars. The latter is the best-selling model from the previous month.

In addition, the reinstatement of the 5% purchase tax on new fuel vehicles announced at the end of 2025 could leave BYD with a “demand vacuum” for the new year as consumers rush to make their purchases before the tax takes effect, Cheng said.

However, “I think it’s absolutely more challenging for companies to differentiate (themselves),” said Abby Tu, principal research analyst at S&P Global Mobility.

Many of BYD’s rivals have tried to carve out niches for themselves in China’s huge EV market by asserting themselves in high-end luxury segments, Tu added.

BYD has responded to intense domestic competition by increasingly turning to overseas markets. In February, the company’s exports surpassed its domestic sales for the first time, according to CNBC’s calculations.

“BYD’s hedge export – (the company’s) overseas sales will cross 1 million units for the first time in 2025, a buffer that domestic rivals absolutely cannot match,” Cheng said.

On the domestic front, consumers will see the EV giant’s new product launch later this year, with the company’s new battery in mind, according to Cheng.

“Last year’s free ‘God’s Eye’ (advanced driver assistance system feature) rollout accelerated demand growth without triggering a price war. Similar drama is expected with Blade Battery 2.0 and second-gen flash charging imminent,” he said.

Despite growth in sales volumes across several automakers, China’s EV market is still grappling with sluggish demand due to the imposition of a 5% purchase tax on new energy vehicles, after previously being exempt from the full 10% tax.

According to Professor Lawrence Loh of the National University of Business School of Singapore, in scaling back its incentives for EV purchases, Chinese regulators are signaling a “deliberate normalization” of the country’s EV market.

Such measures are designed to encourage greater self-reliance among Chinese automakers, Loh said.

However, analysts say this rollback in fiscal incentives could curb demand for new EV purchases, as the market expects costs to be uniformly passed on to consumers.

A 5% tax, “for example, on a $200,000 car… still has like $10,000 (added) to the purchase cost, so… it’s something to think about,” said Tu from S&P Global Mobility.

However, some automakers have tried to boost the country’s sluggish domestic demand by offsetting some of the financial costs on consumers, Tu added.

Automakers in China have resorted to creative financing schemes to boost consumer demand.

CNBC previously reported that Tesla has begun offering customers five-year 0% interest rate loans or seven-year “ultra-low” interest rate loans. Xiaomi has also unveiled a similar offer offering seven-year “low-interest financing” deals, according to its official Weibo account.