By Micah Jonah
January 12, 2026
Volkswagen has fallen to third place in China’s auto sales rankings after being overtaken by fast growing domestic rival Geely Auto, underscoring the continued shift of the world’s largest car market towards local manufacturers.
Industry data released by the China Passenger Car Association showed that Volkswagen’s two joint ventures with FAW and SAIC Motor accounted for a combined 10.9 percent share of retail vehicle sales last year, down from 12.2 percent previously. The decline pushed the German automaker behind Geely Auto, whose market share rose sharply to 11 percent from 7.7 percent, while BYD retained the top position despite a slight dip in share.
The loss of ground marks another setback for Volkswagen, which had dominated China’s auto market for more than a decade before being overtaken by BYD in 2024. Although Volkswagen remains the country’s best selling foreign brand, it has struggled to keep pace with Chinese competitors that have moved faster into electric vehicles.
Analysts say legacy foreign automakers such as Volkswagen, General Motors and Toyota have steadily ceded market share as Chinese consumers increasingly favour electric vehicles supported by state subsidies. Budget vehicles have been a major driver of growth, with cars priced below 150,000 yuan accounting for more than half of all new passenger vehicle sales in China last year.
In response, Volkswagen has stepped up incentives, expanded partnerships to regain momentum. The company is working with Xpeng to develop electronic architecture for more China focused models, plans to develop its first in house chip for next generation smart cars in partnership with Horizon Robotics.
Volkswagen is also exploring the export of vehicles developed and manufactured in China to overseas markets, as Chinese automakers including BYD accelerate global expansion to offset slowing demand at home.
Geely and other domestic brands such as Leapmotor continued to gain share, particularly in the lower priced segments, as intense competition reshaped the market and challenged even China’s largest electric vehicle makers.
The latest figures highlight a broader transformation of China’s auto industry, where local manufacturers are rapidly consolidating their dominance and foreign brands are racing to adapt to an electric, technology driven future.
