Toyota has overtaken Volkswagen in battery-electric car sales in China. A symbolic passing of the crown in the world’s largest car market that underlines the growing pressure on Europe’s biggest automaker.
The reversal comes as Volkswagen has slipped to third place overall in China, ceding ground to domestic rivals and exposing the limits of its electric push in a market it once dominated.
For years, Volkswagen treated China as the cornerstone of its global success. More than 40 percent of the VW brand’s sales are made there, a dependence that once delivered enviable profits. And for years, the brand was the top seller in China. But as of now, the numbers tell a different story.
Telling trend
Data compiled by Marklines show that Toyota registered more than 100,000 battery-electric vehicles in China in 2025, compared with roughly 85,000 for the Volkswagen brand. The gap is not vast in absolute terms, but the underlying trend is telling.
Toyota has long prioritised hybrids and hydrogen technology, but is still behind in the full deployment of its electric car range. Volkswagen, by contrast, staked its future on battery power after the diesel scandal and invested heavily in dedicated electric platforms.
Yet in China, the strategy isn’t working anymore. The electric share of VW brand sales in the country fell sharply last year: from 2.8% to 1.1%.
Toyota’s modest but steady expansion lifted its proportion of battery cars from 0.8 to 1.4%. A keen eye will notice that both auto giants, or the number one (Toyota) and number two (VW Group) of the world, remain marginal players in China’s competitive EV arena.
Aggressive pricing
The scale of that competition is best illustrated by BYD, which sold more battery-electric cars in December alone than Toyota and Volkswagen managed across the entire year in China. Domestic groups have mastered rapid model cycles and aggressive pricing.
However, that uptick was temporary and linked to an end-of-year incentive stop. At the beginning of 2026, BYD lost one-third of its domestic market share.
But where does Toyota’s advance rest? Largely on one affordable sport utility vehicle developed with its local partner GAC, the bZ3x. Priced at around €17,000, the model accounts for 70,000 registered models in China.
Volkswagen’s broader position in China has also deteriorated. Industry figures show that the combined ventures it operates with FAW and SAIC saw their market share fall to 10.9 percent in 2025, down from 12.2 percent a year earlier. Geely Auto edged ahead with 11 percent, leaving Volkswagen in third place after it lost its long-held crown to BYD in 2024.
Tech firms on the rise
As noted, price competition has been brutal, particularly in the sub-€20,000 segment (150,000 yuan), which accounts for more than half of new passenger car sales. Volkswagen has resisted joining the steepest discounting, a price that it pays in volume loss. In other terms, its electric sales in China halved last year.
The pressure is not confined to Wolfsburg. Xiaomi has shown how quickly the landscape can shift. Its SU7 electric saloon became China’s best-selling passenger car in January 2026, topping national retail rankings with 37,869 units.
The model’s rapid climb since launch Has Set Back established manufacturers, including Tesla, whose Model Y languished outside the top model that month.
Note that Xiaomi is a spin-off from a tech firm and doesn’t have a strong automotive heritage. In fact, in today’s reality, the latter seems more of a burden than an asset. Globally, however, Volkswagen still sells more electric cars than Toyota.
