The competitive landscape of the Chinese automotive industry is entering a new phase as BYD, considered China's largest electric vehicle company, has recently shown a distinct slowdown in the domestic market.

According to an industry analysis report released by the Korea Automotive Technology Institute (KATECH), BYD's passenger car sales in China stopped growing starting from the end of 2024, and both sales volume and market share declined significantly in January and February 2026.

During this period, the fact that Geely overtook BYD and took the lead is considered a symbolic change.

The report identifies two factors as the background for this sluggishness.

One is the excessive price competition known as "internal pricing" that has spread throughout the Chinese automobile market.

As the technology gap narrowed rapidly, cutthroat competition among companies intensified, which resulted in the weakening of BYD's price and technology advantages.

The other is the Chinese government's policy for the qualitative growth of the automotive industry. Analysis suggests that as energy efficiency and performance standards have been significantly strengthened, companies with lineups centered on small and low-cost cars have been put at a relative disadvantage, and BYD has also fallen under this influence.

In particular, the mandatory national standard (GB) for electric vehicle energy consumption, which has been in effect since 2026, has brought about significant changes to the market.

Unlike existing recommended standards, the new standards restrict production and sales themselves if they are not met.

With the addition of reduced acquisition tax exemptions for new energy vehicles and changes to the support system for replacing old vehicles, the policy attractiveness of low-cost models has significantly decreased.

The report points out that while BYD's BEV models are relatively responsive, the burden has increased as a significant number of its high-volume PHEV models fail to meet the strengthened standards.

Such environmental changes are expected to accelerate the restructuring of the entire Chinese automotive market.

By segment, a contraction of small and low-cost cars is expected, while mid-size, large, and premium vehicles are on the rise; furthermore, differentiation through smart and autonomous driving features is likely to become more important than competition over powertrains.

From an industrial perspective, it is highly likely that restructuring will accelerate, centered on companies lacking technological and financial capabilities, and that movements seeking brand redefinition and expansion into overseas markets will also increase.

The report warns that since Chinese automakers, including BYD, still rely heavily on the domestic market, they could suffer a significant blow if they fail to respond to regulations.

At the same time, it is emphasized that this process of responding to regulations can serve as a stepping stone for strengthening technological competitiveness and pioneering overseas markets.

In fact, BYD is seeking a turnaround by successively announcing large-scale investments to strengthen ultra-fast charging technology, next-generation blade batteries, and autonomous driving capabilities.

The Chinese automotive industry looks ahead to 2026It is facing another turning point as it shifts its center of gravity from quantitative growth to qualitative competition.