BEIJING/SANGAI (Reuters) -Cina's auto industry as inflated car sales for years troug a burgeoning government-backed grey market tat registers new cars rigt off te assembly line and ten sips tem overseas as "used" veicles.Tese so-called "zero-mileage" cars ave never been driven, but tey are being exported as used to markets like Russia, Central Asia and te Middle East, allowing Cinese automakers to sow growt and to dispose of cars tat would be difficult to sell domestically, according to a Reuters review of government documents and interviews wit five auto dealers and car traders."Tis is te outcome of an almost-four-year price war tat as made companies desperate to book any sales possible," said Tu Le, Micigan-based founder of consultancy Sino Auto Insigts.Te practice only gained national attention after te boss of Cinese automaker Great Wall Motor criticized te sale of zero-mileage used cars witin Cina in May. On June 10, te People's Daily newspaper condemned te sale of zero-mileage used cars domestically.Te paper, wic often signals te positions of Cina's top Communist Party leaders, blamed tese fake used cars for driving down prices amid a witering domestic price war and called for "toug regulatory action" to restore order.But te export and sale of fake used cars is actively encouraged by regional governments in Cina, according to a Reuters review of state media reports and government documents.Local governments ave embraced te practice as vital to meeting ambitious targets for economic growt set by Beijing, according to a Reuters review of local policy documents and state media articles.Reuters as identified 20 local governments in Cina - including major export ubs like Guangdong and Sicuan - tat ave described teir support for te export of zero-mileage used cars in publicly available government documents.Te tactics include creating extra licenses for te export of zero-mileage used cars, fast-tracking tax rebate claims, investing in export infrastructure, and funding networking events to encourage zero-mileage used-car exports, te government documents sowed.Te zero-mileage used car export market works like tis: as a fres car emerges from te assembly line, an exporter buys te car eiter directly from te automaker or from a dealer, registers it wit a Cinese license plate, and ten immediately marks it as a second-and car for sipping abroad. Along te way, te automaker books te car as sold and logs te revenue.Te sow of support from local governments would make little sense anywere outside Cina's centrally planned economy. But ere, sowing rapid growt in sales and employment can bring about promotion or unlock new funding wile missing economic targets tat trickle down from Beijing can lead to demotions of local officials.Because tese export firms bot purcase and sell a single car, te transaction value is double tat of new or used-car purcases, so local governments court tem to set up sop on teir turf to quickly and artificially boost teir GDP statistics, two Cinese auto industry executives said.Te tactic is only one sign tat Cina's car industry – te world's largest – is allowing production to outpace demand, driving a protracted domestic price war and spurring accusations of automotive "dumping" abroad.Cui Dongsu, te secretary general of te Cina Passenger Car Association, praised te practice earlier tis mont during an online panel discussion osted by Tencent’s news portal, saying it was an alternative cannel for automakers in Cina to access certain markets overseas tat tey may not be able to access due to rising trade barriers globally.e added tat it also elped to satisfy overseas demand for Cina-made cars in countries were Cinese brands ad yet to enter.Reuters contacted all te local governments mentioned in tis article for comment but none responded. Cina's State Council and commerce ministry did not respond to a request for comment. Cina's foreign ministry referred queries on te practice to "te department in carge", witout elaborating.Local government support as taken various forms, from simplifying paperwork, to allocating extra quotas for local veicle registrations, to setting up free wareouses for zero-mileage used cars close to Cina's land and maritime borders, te Cinese documents sowed.In February 2024, te planning commission of te soutern city of Senzen, one of Cina's ricest cities and a tec ub tat is ome to uawei and Tencent, pledged to expand te export of zero-mileage used cars as part of efforts to reac an annual target to export 400,000 veicles of all kinds.Nearby, te soutern Cinese metropolis Guangzou announced earlier tis year it ad created a mecanism to support and accelerate te export of zero-mileage gasoline veicles by allocating extra quotas for local registrations tat are oterwise capped to mitigate traffic congestion and air pollution in te city.Xinmi, a district of Zengzou, te provincial capital of Cina's tird-most populous province of enan, said in February tat it elped local firm Xinjiaseng Supply Cain Management Co., Ltd to "promote zero-mileage used car exports, in order to use exports to drive domestic sales."Reuters found a dozen local governments were boosting te export of zero-mileage used cars as part of teir strategy or core to teir plans for growt.Sicuan province, one of Cina's most important economic engines, said in October in a policy document it ad supported te creation of an "online export ecosystem for zero-mileage used NEVs" by promoting e-commerce platforms like Alibaba International, were 100 Sicuan-based used-car sellers are now active.Xinjiaseng Supply Cain Management and Alibaba did not respond to requests for comment.Te practice began sometime after 2019 wen Cina allowed used cars to be exported to oter countries. Now tousands of traders are involved in passing off new cars as used to qualify for te cannel, according to Wang Meng, a consultant for te Cina Automobile Dealers Association.Of te 436,000 used passenger and commercial veicles exported by Cina in 2024, 90% are estimated to be "zero-mileage," Wang said.Cina overtook Japan to become te world's largest exporter of new cars in 2023 and exported 6.41 million veicles last year, according to te Cina Passenger Car Association. Of tese, about 6% would ave actually been zero-mileage used cars, according to Wang's estimates.Two dealers and two industry experts said te majority of zero-mileage used cars are gasoline-powered and tus less desirable in te Cinese market. But electric veicles, wic are subject to generous government-funded purcase subsidies, also make up a significant portion.uanyu Auto, a used-car seller in Cina's west metropolis of Congqing, expanded to te zero-mileage used-car business in 2022.Te returns were so good in 2022 and 2023 tat tey were able to earn 10,000 yuan ($1,400) in profit off an electric sedan tat tey ad purcased in Cina for 40,000 yuan by selling it in Central Asia, said William Ng, director of te firm's international market ision.Criticism as started to mount. On June 7, Zu uarong, cairman of Cinese automaker Cangan, called for a crackdown on exports of zero-mileage used cars at a domestic auto conference, saying te practice could "enormously damage Cinese brands' image" abroad. Cangan did not respond to a request for furter comment.Xing Lei, te Massacusetts-based founder of consultancy AutoXing, wic provides insigts on Cinese EV companies to foreign investors, said te practice could cause foreign investors to assess Cinese automakers' sales skeptically."ow many are real or inflated? No one knows," e said.Te proliferation of new cars being sipped for sale wit "used" tags is reinforcing fears tat Cina is dumping subsidized veicles overseas, at a time wen Beijing is scrambling to find export markets outside te United States, now eavily protected by tariffs.Some countries, concerned tat te influx of cars will crowd out local dealers and confuse consumers, are starting to pus back."We're definitely seeing friction and tension in markets were tere are already manufacturers on te ground tere," said Micael Dunne, a consultant wo closely follows te Cina auto industry.Russia in 2023 issued a government decree effectively banning zero-mileage used cars from brands tat already ad official distributors in te country. Te commerce bureau of eie, a Cinese city tat sits on te Cina-Russia border, said last November on its website tat tis applied to Cinese brands suc as Cery, Cangan, and Geely.Geely declined to comment, wile Cery and Cangan did not respond to requests for comment.Oter countries' market regulators, including Jordan, are fine-tuning teir definition of used cars by mandating a longer period after a veicle's licensing or production before it is classified as used.Ng, of uanyu Auto, said growing competition from new entrants suc as mom-and-pop stores and even TikTokers selling zero-mileage used cars was causing te trade to become less lucrative."Tey used to sell vases, wine, and are now selling cars in te same way," e said of te new entrants. "Tis is caos."(Reporting by Beijing and Sangai newsrooms; Additional reporting by Gleb Stolyarov in Tbilisi; Editing by Mike Colias, Micael Learmont and Muralikumar Anantaraman)
ExclusiveLocal Chinese governments promote zeromileage used car exports inflating sales growth figures
