End of total tax exemption for electric cars changes the Chinese automotive landscape; Germans bet on local partnerships to speed up production
Volkswagen retook the position of best-selling brand in China in the first two months of 2026, displacing BYD, which fell to fourth position in the overall ranking of registrations. The move marks a turning point in the world’s largest automotive market, where the absolute dominance of pure electric vehicles is beginning to give way to automakers with diversified portfolios, including hybrid and combustion models.
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The change in the ranking is a direct reflection of Beijing’s new fiscal policies. Since the beginning of 2026, the Chinese government has ended the total tax exemption for the purchase of electric vehicles; Now, these models pay 50% of the acquisition fee. The gradual withdrawal of national subsidies has hurt manufacturers focused exclusively on low-cost batteries.
In this scenario, Volkswagen recorded a share of 13.9%, while Geely took second place with 14.1% in the passenger segment. BYD, while still leading the “New Energy Vehicles” (NEVs) niche with a share of more than 19%, has felt the cooling in total sales of its entry-level line.
To sustain the resumption, Volkswagen starts mass production of the ID.UNYX 08 at its Hefei plant this Friday (13). The electric SUV was developed in record time — just 24 months — through a joint venture with China’s Xpeng. The strategy aims to accelerate the development of software and connectivity technologies, areas where local brands still maintain a competitive advantage.
BYD, in turn, is preparing a technological response with the second generation of the Blade battery. The new architecture promises greater energy density and ultra-fast recharging, in an attempt to regain the prominence lost after the tax reform that favored the return of traditional brands.
