Early 2026 data shows BYD slip while peers post gains
BYD’s domestic momentum softened at the start of 2026 as China’s electric vehicle market showed signs of slower demand growth and competitors posted faster sales gains. The world’s largest EV manufacturer recorded a roughly 36% decline in combined January and February sales versus the prior year, adjusted to account for the seasonal disruption tied to the mid-February Chinese New Year holiday.
By contrast, many local rivals reported year-on-year increases over the same two-month period. Leapmotor reported 60,126 combined January and February sales, up 19%. Xiaomi sold more than 59,000 units, a 48% increase. Nio and Geely’s Zeekr recorded the strongest surges, with combined sales rising by about 77% and 84%, respectively, based on CNBC calculations cited in the account.
Not every automaker benefited. Xpeng posted the steepest decline, with combined deliveries of 35,267, down roughly 42% from a year earlier. Li Auto deliveries fell nearly 4% to 54,089.
Competition intensifies as mid-market becomes crowded
Beyond seasonal factors, the pattern suggests a more competitive domestic landscape. Leon Cheng, head of mobility at consulting firm YCP, said BYD remains the leader but is facing a narrowing advantage. He said a near-term reversal of leadership is unlikely, but described domestic share compression as the direction of travel.
Cheng said BYD controlled roughly 26% to 34% of China’s new energy vehicle market during 2024 and 2025, but rivals such as Geely and Leapmotor have been taking ground by targeting parts of BYD’s core mid-market. Companies have been competing by maximizing value at competitive price points, a dynamic often described in China as involution.
The surge in Xiaomi’s vehicle sales has been a key data point for the market. Xiaomi’s YU7 SUV was China’s best-selling passenger vehicle in January, selling more than twice the number of Tesla Model Y units, according to the account. The Model Y had led the prior month.
Abby Tu, principal research analyst at S and P Global Mobility, said differentiation is becoming more difficult as features, pricing, and model lineups converge. She added that several competitors are seeking separation by building positions in higher-end segments of the market.
Tax reset may have pulled forward demand and reshaped buying timing
Policy changes are also influencing demand patterns. At the end of 2025, China reinstated a 5% purchase tax on new energy vehicles after a period of exemption from the full 10% rate. Cheng said the policy shift likely created a demand vacuum at the start of 2026 as consumers accelerated purchases before the tax took effect.
Analysts cautioned that the tax can be meaningful in absolute terms for higher-priced models. Tu noted that on a $200,000 vehicle, a 5% tax translates into roughly $10,000 added to the purchase cost, affecting affordability and financing decisions even for premium buyers.
Lawrence Loh, a professor at the National University of Singapore Business School, described the reduction in incentives as a purposeful normalization that signals regulators want automakers to become more self-reliant rather than relying on long-running purchase support.
BYD leans on exports as domestic lead narrows
BYD has responded to intense home-market competition by leaning harder into overseas expansion. In February, BYD’s exports exceeded its domestic sales for the first time, based on CNBC calculations cited in the report. Cheng described exports as a hedge, noting BYD’s overseas sales surpassed 1 million units in 2025, a scale advantage that purely domestic competitors have not matched.
On the product side, Cheng said markets are watching for BYD’s next launch cycle later this year, with battery updates in focus. He said the free rollout of the company’s God’s Eye advanced driver assistance feature last year supported demand without triggering a price war, and he expects a similar strategy around Blade Battery 2.0 and second-generation flash charging.
Financing incentives spread as automakers chase demand
Even as some brands grow, the broader market is facing slower demand growth, and automakers are increasingly using financing to protect volumes. Tu said some companies are offsetting costs for consumers to stimulate purchases. CNBC previously reported that Tesla began offering five-year 0% interest loans or seven-year ultra-low interest loans. Xiaomi later introduced a similar offer, promoting seven-year low-interest financing through its official Weibo account.
The early 2026 sales split suggests China’s EV market is entering a more normalized phase in which growth is harder won, incentives are less generous, and brand leadership depends more on product cycles, pricing discipline, and the ability to sustain demand when policy support fades.