Summary of Key Points
From January to July 2026, the domestic passenger vehicle market witnessed three significant changes:
1. The battle for sales leadership between BYD and Geely shifted from a one-sided advantage to a closely contested race, with the cumulative sales gap narrowing to around 30,000 units.
2. BYD fell far behind the overall market growth due to the slowdown in its plug-in hybrid segment, while Geely managed to withstand the downturn thanks to its diversified product portfolio.
3. New players such as Zero Run entered the mainstream market (price range: 100,000–200,000 RMB), intensifying competition.
4. Exports have become a crucial support for automakers, with notable differences in the structure of new energy vehicles between domestic and international markets (plug-in hybrids are less popular in China but still in demand overseas).
1. The Battle for Sales Leadership Between BYD and Geely: A Narrow Gap of 30,000 Units
In previous years, BYD maintained a dominant position in sales. However, the situation changed significantly in 2026:
- Data Comparison: From January to July, BYD sold 1.214 million vehicles domestically (a year-on-year decrease of 35.6%), while Geely sold 1.182 million vehicles (a decrease of 17.3%), with a gap of only 32,000 units.
- Trend Reversal: Geely led sales for consecutive months in January and February, and its cumulative sales for the first six months (1.021 million) were even 30,000 units higher than BYD’s (991,000 units). It was not until July that BYD overtook Geely with monthly sales of 223,000 units compared to Geely’s 161,000 units, regaining the lead in cumulative sales.
- Significance: The competition for sales leadership has evolved from a clear advantage for BYD to a closely contested battle, indicating that its previous dominance is no longer absolute.
2. BYD Falls Behind the Market Growth: The Decline of Plug-in Hybrids
BYD’s decline was 15 percentage points higher than the overall market (20.3%), mainly due to the slowdown in its plug-in hybrid business:
- Plug-in Hybrid Market Slump: Domestic sales of plug-in hybrids decreased by 26.6% in the first seven months of 2026, compared to a 4.7% decrease for pure electric vehicles. BYD’s growth relied heavily on its DM-i plug-in hybrid model, which was affected significantly.
- Dual Pressures from Policy and Market:
- Policy: After the new energy vehicle purchase tax was halved, plug-in hybrids required a range of at least 100 kilometers to qualify for the tax reduction (previously, 43 kilometers were sufficient), causing some older models to lose their tax benefits.
- Market Trends: The expansion of public charging infrastructure and faster charging speeds made it more convenient to use pure electric vehicles, reducing the appeal of plug-in hybrids.
- Impact on BYD: Its core market for growth has turned into a competitive environment where consumers are re-evaluating between pure electric and hybrid options.
3. Geely’s Resilience: Diversified Product Portfolio
Geely’s sales decline was 3 percentage points lower than the overall market, thanks to its diversified product strategy:
- Multi-Product Approach: Geely offers a range of fuel-powered, hybrid, and pure electric vehicles. Although its fuel-powered car sales decreased, its Galaxy series (a new energy model in the 100,000–200,000 RMB price range) competes directly with BYD’s Dynasty/Ocean series.
- Benefiting from Pure Electric Growth: The pure electric market grew by 6% year-on-year in July, and Geely’s early investment in this segment allowed it to capitalize on the recovery in this sector.
- Result: Its diversified portfolio helped Geely stay more stable during market adjustments, transforming it from a follower to a challenger.
4. Zero Run Emerges as a Major Player: New Players Enter the Mainstream Market
Zero Run sold 84,000 vehicles in July (a year-on-year increase of 83.9%), entering the top three domestic passenger vehicle manufacturers for the first time, indicating a shift in competition towards more affordable models:
- Competitive Strategy: Instead of focusing solely on high-end vehicles, Zero Run targets the mid-range market with cost-effective and high-specification models (e.g., large batteries, intelligent infotainment systems).
- Impact on BYD: The 100,000–200,000 RMB price range, once BYD’s stronghold, is now a focal point for competition from new players.
5. Exports Become a Vital Support: Significant Differences in New Energy Market Structures
While the domestic market declined, export sales nearly doubled, becoming a crucial source of revenue for automakers:
- Export Figures: In July, 918,000 passenger vehicles were exported (a year-on-year increase of 87.8%), accounting for 40.8% of total sales.
- Domestic vs. International Market Differences: Domestic plug-in hybrid sales dropped by 26.6%, while overseas exports of plug-in hybrids increased by 174.2% (range-extended models grew by 363.7%). The preference for “fuel-efficient and electric-ready” vehicles is higher in international markets.
- Case Study: Chery’s domestic sales were only 75,000 units (fifth place), but its total exports reached 266,000 units (second place), highlighting the importance of exports.
- Implications for BYD: Weak domestic performance does not necessarily mean a loss of competitiveness, but the challenges in the domestic market (declining plug-in hybrid sales and intensified competition) are evident.
Conclusion
The competitive landscape in the 2026 domestic passenger vehicle market has changed significantly. BYD’s advantage in plug-in hybrids is no longer significant, and Geely has managed to withstand the downturn with a diversified product strategy. New players like Zero Run are gaining traction in the mainstream market. Exports have become a vital support for automakers. Although BYD regained the lead in July, its margin of success has narrowed significantly. Whether it can maintain its dominance depends on its ability to address the challenges posed by the decline in plug-in hybrid sales and the intensifying competition in the mainstream market.