BYD, the world’s largest electric vehicle manufacturer, reported a decline in domestic sales during the first two months of 2026. Adjusted for seasonal fluctuations linked to the Chinese New Year, sales fell by 36% year-over-year, highlighting intensifying competition in China’s electric vehicle market.

Competitive Surge And Shifting Market Dynamics

While BYD’s sales weakened, several competitors posted strong gains. Leapmotor and Xiaomi reported year-over-year sales growth of 19% and 48%, respectively. Leapmotor delivered 60,126 vehicles during the two months, while Xiaomi exceeded 59,000 units.

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Other manufacturers also recorded significant increases. Deliveries at NIO rose by 77%, while Zeekr reported an 84% increase, according to calculations cited by CNBC.

Not all automakers saw growth. Deliveries at XPeng declined by 42%, while Li Auto recorded a smaller drop of nearly 4%, illustrating uneven performance across the sector.

China’s Leveling Playing Field

Analysts say competition in China’s EV market is becoming more balanced. Leon Cheng, head of the mobility practice at YCP, noted that BYD still holds a substantial market share but faces increasing pressure from competitors targeting mid-range vehicle segments.

New product launches are also reshaping the landscape. Xiaomi’s YU7 SUV became the best-selling passenger vehicle in China in January, surpassing the Tesla Model Y, which had previously held the top position.

Policy changes may have also affected recent sales. China reinstated a 5% purchase tax on new energy vehicles, prompting many consumers to accelerate purchases before the tax took effect.

Push For Self-Reliance And Diversification

Chinese EV manufacturers are increasingly expanding beyond domestic markets. BYD has accelerated its international strategy, and in February, its exports exceeded domestic sales for the first time. Growing overseas demand provides a buffer against rising competition in China, where multiple manufacturers are targeting the same consumer segments.

Regulators are also gradually reducing purchase incentives for electric vehicles to encourage technological development and greater industry self-reliance. Lawrence Loh, professor at the National University of Singapore Business School, noted that this shift is encouraging companies to develop new financing strategies.

Several automakers have already introduced new financing offers. Tesla launched five-year zero-interest loans, while Xiaomi introduced seven-year low-interest financing options aimed at maintaining consumer demand.

Looking Ahead

BYD is preparing new product launches for the domestic market later this year, including models featuring updated battery technologies and driver-assistance systems.

Industry observers say these developments could support renewed demand while avoiding another round of aggressive price competition in China’s EV sector.