In the first two months of 2026 Volkswagen regained leadership in car sales in China, the world’s largest automotive market. This is also thanks to its local joint ventures with FAW and SAIC, which together held a 13.9% share of the passenger car market, according to data released by the China Passenger Car Association. Behind the German giant was Geely with 13.8%, while Toyota’s joint ventures with GAC and FAW collected a combined share of 7.8%. During this same period, Toyota gained ground, overtaking BYD.
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Volkswagen returns to the lead in China
The return of traditional Western and Japanese manufacturers coincides with a significant revision of public incentives: in fact, the expiration of tax exemptions on the purchase of electric cars along with the progressive reduction of subsidies allocated by Beijing have altered the competitive balance. According to Cui Dongshu, secretary general of the CPCA, the contraction of incentives has favored conventional hybrid vehicles, a segment in which Toyota is particularly strong, at the expense of plug-in hybrids and low-cost full electrics. This results in diversified effects: local manufacturers that had focused on EV and PHEV are the most exposed to the consequences of the reduced generosity of incentives.
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BYD slips to fourth place
The impact is already visible in the numbers: BYD, which in 2024 had ousted Volkswagen as the largest automaker in China by revenue, slipped to fourth place with a 7.1% share in the January-February period, recording the most pronounced drop in sales since the start of the pandemic. To bounce back, the Chinese tech company recently updated its Blade batteries, while Volkswagen has started mass production of its first model developed with the Chinese company Xpeng. The Wolfsburg-based giant, moreover, also aims to introduce over 20 new electric models in China by the end of 2026.
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