Combined January and February sales for BYD fell by about 36% year on year after adjusting for the seasonal slowdown caused by the two-week Chinese New Year holiday in mid-February. The decline comes at a time when several rival automakers posted strong growth, highlighting a gradual shift in the competitive landscape of China’s EV industry.
Rivals gain ground
Several Chinese EV makers reported notable increases in deliveries over the same period.
Leapmotor recorded 60,126 combined sales in January and February, marking a 19% year-on-year increase. Meanwhile, Xiaomi sold more than 59,000 vehicles across the two months, a sharp 48% jump from the same period in 2025.
Other players experienced even faster growth. Sales for Nio rose by about 77% year on year, while Zeekr — the premium EV brand under Geely — saw combined deliveries surge roughly 84%, according to CNBC’s calculations.
Not every automaker saw gains, however. Xpeng reported the steepest decline among the group, delivering 35,267 vehicles in January and February — a drop of around 42% compared with the previous year. Li Auto also recorded a slight dip, with deliveries slipping nearly 4% to 54,089 units.
A leveling playing field
Beyond seasonal effects, the shift in sales suggests that China’s once-clear EV hierarchy is becoming less defined as competitors introduce increasingly attractive alternatives.
Analysts say BYD’s position remains strong but is gradually tightening. Leon Cheng, head of the mobility practice at consulting firm YCP, noted that the company’s dominance in China’s new energy vehicle (NEV) market — which includes EVs and plug-in hybrids — has been substantial. BYD controlled roughly 26% to 34% of the market between 2024 and 2025.
However, rivals such as Geely and Leapmotor have begun targeting segments central to BYD’s strategy, particularly the mid-market category where price and value are critical factors.
Chinese automakers have been engaging in a strategy often described as “involution,” where manufacturers pack increasingly advanced features into vehicles while keeping prices competitive. This approach has intensified competition and made it harder for any single brand to stand apart.
One example of this trend is Xiaomi’s new YU7 SUV, which became China’s best-selling passenger vehicle in January, selling more than twice the number of Tesla Model Y units during the same month. The Model Y had been the top-selling vehicle in the country just a month earlier.
Policy shifts affecting demand
Government policy is also influencing the market’s dynamics. At the end of 2025, Chinese authorities reinstated a 5% purchase tax on new energy vehicles. The vehicles had previously been exempt from the full 10% purchase tax applied to conventional cars.
The reintroduction of the tax may have temporarily reduced demand early in the year. Analysts suggest that many consumers rushed to buy EVs before the new tax took effect, leaving a short-term gap in purchases at the start of 2026.
Abby Tu, a principal research analyst at S&P Global Mobility, noted that differentiating products in China’s EV market is becoming increasingly difficult as manufacturers offer similar levels of technology and performance.
Some companies have attempted to stand out by targeting premium and luxury segments rather than competing solely on price.
BYD turns to overseas markets
In response to intensifying domestic competition, BYD has increasingly looked abroad for growth. The company’s international expansion has accelerated in recent years, and February marked a milestone: BYD’s vehicle exports exceeded its domestic sales for the first time.
Overseas deliveries also passed a major threshold in 2025, with the company selling more than one million vehicles outside China. Analysts view this as a strategic buffer that many purely domestic EV brands do not yet have.
Technology and product launches ahead
Despite the competitive pressures, BYD is expected to push back through new technology releases later this year.
Industry watchers are closely monitoring the next generation of the company’s battery and charging technologies. BYD’s upcoming Blade Battery 2.0 and second-generation flash-charging systems are expected to feature prominently in new models.
Last year, the company boosted demand by introducing its “God’s Eye” advanced driver-assistance system across several models at no additional cost, a move that increased consumer interest without triggering an industry-wide price war.
Push for industry self-reliance
China’s broader EV policy direction also reflects a shift in strategy. According to Professor Lawrence Loh of the National University of Singapore’s Business School, the gradual rollback of subsidies signals a “purposeful normalization” of the country’s EV market.
Regulators appear to be encouraging automakers to become more self-reliant rather than relying heavily on government incentives.
However, analysts warn that reduced incentives could slow consumer demand if the added costs are passed on to buyers. For instance, a 5% tax on a vehicle priced at $200,000 would add roughly $10,000 to the purchase price.
To offset these pressures, some automakers have introduced creative financing options. Tesla has begun offering five-year loans with zero interest, as well as seven-year loans with ultra-low interest rates. Xiaomi has followed suit with similar seven-year low-interest financing plans promoted through its official channels.
As competition intensifies and government incentives taper off, China’s EV market appears to be entering a new phase — one defined less by subsidies and rapid expansion, and more by innovation, pricing strategies, and global ambitions.