<div id="readability-page-1"><span></span><div id="ArticleBody-InlineImage-108274026"><div><div><p>NANJING, CHINA - MARCH 2, 2026 - New energy vehicles parked outside a BYD store in Nanjing, Jiangsu Province, China on March 2, 2026. (Photo credit should read CFOTO/Future Publishing via Getty Images)</p><p>Cfoto | Future Publishing | Getty Images</p></div></div></div><div><p>BYD lost ground to its domestic competitors over the first two months of the year, as overall demand in China's electric vehicle market slowed.</p><p>The world's largest electric vehicle manufacturer's combined January and February sales volume in 2026 dipped by roughly 36% compared to the year before. This figure was adjusted to account for the seasonal sales slowdown during the two-week Chinese New Year holiday, which took place mid-February.</p></div><div><p>The combined January and February sales figures from China's other EV automakers generally rose across the board, with Leapmotor and Xiaomi both reporting significant year-on-year increases in sales over the same period from the year before.</p><p>Leapmotor clocked 60,126 sales in January and February this year, a 19% jump year on year. Xiaomi sold more than 59,000 units during the same period, notching a 48% leap on year.</p><p>Nio and Geely's Zeekr, in particular, saw January and February combined sales surging by 77% and about 84% year on year, respectively, according to CNBC's calculations.</p><p>Conversely, Xpeng reported the largest year-on-year decline in its combined sales, with the automaker's combined deliveries amounting to 35,267 deliveries, a roughly 42% drawdown from the previous year's. Li Auto's deliveries also fell by nearly 4% to 54,089 sales.</p></div><h2>China's leveling playing field</h2><div><p>Beyond seasonality, BYD's thinning lead in domestic sales suggests a leveling in China's EV playing field, as offerings from its competitors grow increasingly appealing to consumers.</p><p>&#34;BYD's lead is real but narrowing... A full reversal is unlikely near-term, but domestic share compression is the direction of travel,&#34; Leon Cheng, head of the mobility practice at management consulting firm YCP, said.</p></div><div><p>The EV giant had cornered around 26-34% of China's new energy vehicle market in 2024-2025, but other automakers like Geely and Leapmotor gained ground by attacking parts of BYD's core mid-market, Cheng added.</p><p>Rival Chinese EV automakers have sought to erode BYD's dominance by packing as much value into their offerings as possible, while still maintaining competitive price points — a practice known as involution.</p><p>The new YU7 SUV from Xiaomi was China's best-sold passenger vehicle in January, selling more than twice the number of Tesla's Model Y cars. The latter was the best sold model from the month before.</p><p>Additionally, the reinstatement of the 5% purchase tax on new energy vehicles announced at the end of 2025 could also have left a &#34;demand vacuum&#34; for BYD heading into the new year, as consumers rushed to make their purchases before the tax took effect, said Cheng.</p><p>However, &#34;I think it's totally becoming more challenging for companies to differentiate [themselves],&#34; Abby Tu, principal research analyst from S&amp;P Global Mobility, said.</p><p>Many of BYD's competitors have also sought to carve out niches for themselves in China's massive EV market by asserting themselves in the higher-end luxury segments, Tu added.</p></div><div><p>BYD has reacted to the fierce domestic competition largely by pivoting to overseas markets. In February, the company's exports surpassed its domestic sales for the first time, according to CNBC's calculations.</p><p>&#34;BYD's hedge is exports — [the company's] overseas sales crossed 1 million units in 2025 for the first time, a buffer purely domestic rivals can't match,&#34; Cheng said.</p><p>On the domestic front, consumers will likely see the EV giant's new product launches later this year, with the company's new battery in focus, according to Cheng.</p><p>&#34;Last year's free 'God's Eye' [Advanced Driver Assistance System feature] rollout catalyzed a demand inflection without triggering a price war. A similar play is expected imminently with Blade Battery 2.0 and second-gen flash charging,&#34; he said.</p></div><h2>Push for self-reliance</h2><div><p>Despite the growth in sales volumes across several automakers, China's EV market is still grappling with slowing demand, at least partially due to the imposition of a 5% purchase tax on new energy vehicles, after previously being exempted from the full 10% tax.</p><p>In scaling back on its incentives for EV purchases, China's regulators are signaling a &#34;purposeful normalization&#34; in the country's EV market, according to Professor Lawrence Loh from the National University of Singapore's Business School.</p><p>Such moves are designed to encourage greater self-reliance among China's automakers, Loh said.</p><p>However, analysts say that this rollback in financial incentives might suppress demand for new EV purchases, as the market expects costs to invariably get transferred to consumers.</p><p>The 5% tax, &#34;for instance, on a car priced at $200,000... is still like $10,000 [added] to the purchase cost, so... it's something to think about,&#34; said Tu from S&amp;P Global Mobility.</p><p>However, some automakers have also sought to boost the country's slowing domestic demand by offsetting some of the financial costs on consumers, Tu added.</p><p>Automakers in China have resorted to creative financing schemes to spur consumer demand. </p><p>CNBC previously reported that Tesla has begun offering consumers five-year 0% interest loans, or seven-year &#34;ultra-low&#34; interest rate loans. Xiaomi has since also unveiled a similar offer, providing seven-year &#34;low-interest financing&#34; deals, according to its official Weibo account.</p></div></div>

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<p>BYD's sales fell by approximately 36% in the first two months of 2026 compared to the previous year, as demand in China's electric vehicle market slowed. Competitors like Leapmotor and Xiaomi reported significant sales increases, while BYD's market share is narrowing. The reinstatement of a 5% purchase tax on new energy vehicles may have contributed to this decline. Analysts suggest that BYD is pivoting to overseas markets to counter domestic competition, with new product launches expected later this year.</p>

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