A new report claims that China’s auto industry is inflating its sales figures and skirting global trade norms by selling new vehicles abroad as zero-mileage “used” cars. Local governments eager to hit Beijing’s economic targets seem to support the practice, while the CCP condemns it.
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This strategy allows Chinese automakers to register sales, clear domestic inventory, and sidestep trade barriers all at once. Forget issues with selling new cars to places like Russia, Central Asia, and the Middle East; exporting them as “used” solves the issue.
“This is the outcome of an almost-four-year price war that has made companies desperate to book any sales possible,” said Tu Le, Michigan-based founder of consultancy Sino Auto Insights.
More: Chinese Dealers Sell Zero-Mileage Cars As Used To Cash In On Subsidies
That quote and more like it come from an extensive Reuters report detailing the operation. While the practice has been going on for years, it wasn’t until May that a Chinese auto executive, Wei Jianjun, complained about it publicly. Why complain about something that seems to be as good as a license to print money? Well, according to Jianjun, the situation could potentially lead to a crisis within the industry.
A Win-Win Situation For Everyone Involved
Right now, exporters are buying new cars from automakers or dealers. Then, they register them in China, but immediately mark them as used before shipping them out of the country. The automaker gets to count the sales. The exporter gets a big benefit too.
“Because these export firms both purchase and sell a single car, the transaction value is double that of new or used-car purchases, so local governments court them to set up shop on their turf to quickly and artificially boost their GDP statistics, two Chinese auto industry executives said,” Reuters explains.
“Of the 436,000 used passenger and commercial vehicles exported by China in , 90% are estimated to be ‘zero-mileage'”, says Wang Meng, a consultant for the China Automobile Dealers Association. There is a battle brewing over the practice, though.
A Civil War In The Making?
Chinese government officials can’t seem to agree on this practice. Local governments applaud it, going as far as to set up free warehouses for storing zero-mileage used cars. Shenzhen pledged in to expand its zero-mileage used-car storage to reach an annual target of 400,000 vehicles. Other cities are allowing more registrations beyond previous caps to encourage the practice.
After Jianjun spoke out against it in May, another executive, Zhu Haurong, called it out as having the potential to do enormous damage. Others point out that it calls into question sales figures across the Chinese auto industry. For example, is BYD really selling all the cars it claims it is? This loophole makes it impossible to know for sure.
The People’s Daily newspaper condemned the practice not long after Jianjun’s comments, something that is widely seen as a signal of prominent political figures’ position over the issue. At this point, we must wait and see whether local governments will be forced to change their tune or if somehow the CCP can be persuaded to allow this to continue.
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Officials in Beijing have called for an end to the selling of new cars as heavily discounted second-hand vehicles.
The scam – known as “zero-mileage used cars” – is designed to reduce dealers’ inventory. But an article in the Communist Party’s official newspaper on Tuesday says the practice should be stopped.
The People’s Daily, which often signals the positions of China’s top Party leaders on a variety of issues, called for a crackdown on the practice, just weeks after Great Wall Motor’s chairman Wei Jianjun publicly condemned it and China’s commerce ministry met with Chinese automakers to discuss it.
While China’s Commerce Ministry did not make public its position, the People’s Daily struck a harsh tone, calling out the inflation of sales data motivating Chinese carmakers and urging “tough regulatory action” to restore market order.
“This disguised form of price cutting disrupts normal market order and is a striking example of the auto industry’s ‘involution’,” the People’s Daily said, using a term popular in China that describes a race to the bottom driven by excessive competition.
“Once market competition rules are properly enforced, ‘zero-mileage used cars’ won’t be able to run far — or for long.”
China is experiencing growing deflationary pressures as US tariffs add to the gloomy mood in the world’s No-2 economy. Companies in sectors from fast food to high fashion have been cutting prices amid concerns about oversupply and sluggish household demand.
Price wars have gripped the Chinese auto industry in recent years, partly driven by slumping domestic consumption and overcapacity that has left many struggling to meet sales targets.
While the sale of zero-mileage used cars is seen by many Chinese automakers as an effective way of clearing out an ever-growing inventory of unsold cars, with domestic and overseas consumers lured by deep discounts on what are still brand new cars, the state-run newspaper listed a litany of negative effects caused by the practice.
“For manufacturers, this sales tactic may help reduce inventory in the short term but compresses profit margins, increases losses, and hinders investment in product quality and innovation — ultimately harming sustainable development,” the article said.
“For consumers, what seems like a good deal in terms of price comes with hidden risks: the loss of first-owner benefits, potential battery degradation, and steeper depreciation when reselling,” it continued, adding the practice undermines fair competition, distorts market data, and disrupts both new and used car markets.
The People’s Daily singled out manufacturers of electric vehicles as needing to move beyond “data worship” and competing on volume, in order to focus on product quality and technological innovation. It did not name any specific automakers.
The newspaper also listed measures Chinese regulatory authorities should adopt in order to prevent the sale of zero-mileage used cars, including strengthening oversight of second-hand vehicle registration, establishing a vehicle lifecycle tracking system, and strictly controlling the practice of immediate resale after registration.
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