BEIJING, March 13 (Reuters) - Volkswagen

reclaimed car sales dominance in China, the world's largest auto

market, in the first two months of 2026 when Toyota ( TM )

also regained ground, both overtaking local electric vehicle

champion BYD amid fading subsidies for

greener cars.

VW's Chinese joint ventures with FAW and SAIC

held a combined 13.9% share of the country's passenger vehicle

market in sales terms, followed by Geely's 13.8% and a

combined 7.8% from Toyota's ( TM ) JVs with GAC and FAW, data from the

China Passenger Car Association showed.

The legacy automakers' comeback in the market where they

have been struggling to catch up with local rivals in EVs comes

as purchase tax exemptions on electric cars expire and Beijing

scales back subsidies for trading in EVs.

As subsidies fade, hybrid EVs that Toyota ( TM ) specialises in

were shown to have steered some consumers away from PHEVs, said

Cui Dongshu, secretary-general at CPCA.

Local automakers betting on budget electric and plug-in

hybrid vehicles take the biggest hits from the curtailed

incentives.

BYD, which unseated VW as the biggest carmaker in China by

sales in 2024 and held onto the crown last year, fell to fourth

place with 7.1% market share in the January-February period when

its overall sales posted the biggest drop since the pandemic.

The biggest competitor to Tesla unveiled its first

major battery upgrade in six years last week to revive sales in

its home market where a shift toward a value-driven auto market

away from bruising price wars is well in motion.

VW has begun mass production of its first model co-developed

with Chinese partner Xpeng ( XPEV ), the German automaker said

on Friday. It is set to launch more than 20 new EV models in

China this year alone.