Volkswagen tops cars sales in China again, BYD drops to fourth – Introduction

In 2026, Volkswagen has topped the car sales chart in China, surpassing Geely and BYD, while Toyota also gained ground against local Chinese manufacturers. As per the China Passenger Car Association (CPCA) data for the first two months of 2026 Volkswagen, with its Chinese FAW and SAIC joint ventures, captured a cumulative 13.9 percent market share, closely followed by Geely at 13.8 percent. Toyota, with its GAC and FAW joint ventures, stood third with a 7.8 percent market share, followed by BYD’s 7.1 percent market share.

1. China’s car sales have dropped by 26 percent in the first months of 2026
2. Reduced government incentives for EVs and PHEVs likely caused the sales decline

BYD’s declining car sales in 2026

In February, BYD recorded its steepest sales plunge since COVID-19

After it outperformed the sales of Volkswagen’s joint ventures in China in 2024, BYD was the best-selling manufacturer in China in 2025 as well. However, in the first two months of 2026, the Chinese manufacturer’s market share fell to 7.1 percent, which is the manufacturer’s steepest overall sales decline since the COVID-19 pandemic in 2020. However, BYD continues to be the best-selling electric car manufacturer globally.

What is the reason for declining EV and PHEV sales in China?

Reinstatement of taxes on new energy vehicles is likely to be a major cause

In the first two months, China’s car sales fell by 26 percent. In February 2026 itself, sales dropped by 34 percent to 9.50 lakh vehicles, as indicated by China Passenger Car Association data. One major reason for the declining sales in the Chinese market could be due to the imposition of a 5 percent purchase tax on new energy vehicles, which was announced in late 2025. Before this, a tax exemption of 10 percent was offered by the government on such vehicles.

Cui Dongshu, secretary-general of the CPCA, said to Reuters that in 2026, strong hybrids attracted many buyers who might otherwise have chosen plug-in hybrids, a segment that relied heavily on government subsidies. As subsidies declined, automakers that focused on affordable plug-in hybrids and EVs were hit the hardest by the policy change. These policy changes have marked the legacy automakers’ comeback in the Chinese market.