Back to top

Image: Bigstock

Volkswagen Falls to Third Place in China's Competitive Auto Market

Read MoreHide Full Article

Key Takeaways

  • Volkswagen fell to third place in China after Geely passed it, extending its loss of market leadership.
  • VWAGY's China JV market share fell to 10.9% as Geely grew to 11%, reshaping competitive rankings.
  • Volkswagen is boosting localization, EV tech and China-made exports as foreign brands lose ground.

Volkswagen AG (VWAGY - Free Report) slipped to third place in China’s auto market last year after being surpassed by Geely Automobile Holdings Limited (GELHY - Free Report) , marking another setback for the German carmaker in the world’s largest vehicle market. Per Reuters, Volkswagen had already lost its decade of dominance to BYD Company Limited (BYDDY - Free Report) in 2024. The shift highlights the growing pressure on traditional foreign automakers as domestic Chinese brands continue to strengthen their position.

Volkswagen’s two long-standing joint ventures in China, formed with state-owned FAW Group and SAIC Motor, together accounted for a 10.9% share of retail vehicle sales. This represented a decline from the 12.2% market share recorded in 2024, per China Passenger Car Association data. In contrast, Geely Auto significantly expanded its footprint in the domestic market, increasing its share to 11% from 7.7% in 2025. BYD, while still the market leader, also saw its share edge down to 14.7% from 16.2%.

The broader trend reflects how established global automakers, such as Volkswagen, General Motors and Toyota, have steadily lost ground to Chinese competitors. A key factor behind this shift has been the slower pace at which foreign brands have transitioned to electric vehicles, even as Chinese consumers increasingly favor EVs, encouraged by government subsidies and policy support.

In response, Volkswagen is stepping up its localization efforts in China. Beyond expanding its cooperation with Xpeng to jointly develop electronic and electrical architectures for additional models, the company plans to work with Horizon Robotics to create its first internally developed chip for next-generation smart vehicles tailored for the Chinese market. 

It is also exploring opportunities to export China-developed and China-manufactured vehicles to overseas markets, mirroring strategies pursued by Chinese automakers like BYD as they seek growth beyond a slowing domestic market.

Globally, Volkswagen delivered approximately 4.73 million vehicles last year. Demand for electric vehicles remains resilient, as Volkswagen delivered around 382,000 fully electric vehicles globally in 2025, representing a marginal decline of 0.2%. As a result, battery-electric models accounted for 8.1% of the company’s total vehicle deliveries during the year.

BYD delivered 4.6 million vehicles in 2025, which increased 7.7% from 2024 and achieved its full-year sales target. Sales of BYD were evenly split between fully electric vehicles and plug-in hybrids, with nearly 2.3 million units sold in each category. However, this milestone comes as the Chinese auto market faces a difficult year ahead.

For the full year, Geely sold 3.02 million vehicles, meeting its target of 3 million units. Geely has set a 2026 sales goal of 3.45 million vehicles, implying growth of about 14% from 2025 levels. VWAGY has a Zacks Rank #5 (Strong Sell) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Volkswagen AG Unsponsored ADR (VWAGY) - free report >>

Byd Co., Ltd. (BYDDY) - free report >>

Geely Automobile Holdings Ltd. (GELHY) - free report >>

Published in