A fake zero-mileage car scheme that has shocked China has been revealed by Reuters to be funded by local authorities.
Chinese automakers are under intense global scrutiny after a Reuters investigation exposed manipulation of sales figures through the export of “zero mileage” vehicles – cars that come off the assembly line but are registered as used before being exported.
This was intended to artificially “inflate” sales, raising accusations of economic fraud and international dumping.
The plan has been in existence since 2019, growing strongly with the backing of local governments, aiming to boost regional GDP to meet Beijing's target.
Controversial car business scandal
Reuters pointed out that at least 20 localities, including key export zones such as Guangdong and Sichuan, have publicly supported the export of zero-mileage vehicles through tax incentives, infrastructure support and special export licenses.
Shenzhen Development Commission aims to export 400K zero-mileage vehicles in 2024.
Guangzhou also set registration quotas for “zero-mileage” gasoline vehicles, despite environmental protection regulations.
In Sichuan, the government is partnering with e-commerce platforms like Alibaba to boost online car sales.
“The goal is simple – to grow sales and meet targets at all costs,” said Tu Le, an analyst in the United States. “This is the result of a four-year price war that has pushed automakers to the brink.”
As a result, used car exports have surged, with an estimated 90% of the 436K cars exported in 2024 being zero-mileage vehicles.
The incentives go beyond sales figures. Each transaction represents a double economic activity: the sale of a new car and the export of a used one, artificially boosting regional GDP.
Two industry leaders said it was an attractive ploy for local officials to make a positive impression on Beijing.
The big risk is that the reputation of Chinese automakers on the international stage is damaged and the reaction from foreign regulators may increase due to concerns about China's growing position in the global car market.
Accusations of dumping are increasingly fierce.
The massive export of new cars labeled “used” is distorting foreign markets and creating a wave of accusations that China is using dumping tactics to clear domestic inventories.
Russia, one of the major markets for this type of vehicle, has imposed a ban from 2023 on new zero-mileage vehicles from manufacturers with official dealerships, targeting Chinese brands such as Chery, Geely, and Changan.
The Chinese border city of Heihe also confirmed the ban in a public announcement, but the car companies involved did not respond or declined to comment.
Other countries have also tightened the definition of “used cars” to close loopholes. Jordan, for example, requires a waiting period after a car is registered before it can be considered used.
“This is causing conflict with traditional carmakers and dealer networks,” said Michael Dunne, a consultant to China’s car export industry. “It’s not just about market share, it’s about trust.”
At home, many company executives want to move away from that reality. Changan Chairman Zhou Huarong warned at a recent conference that exporting zero-mileage vehicles could “greatly damage the image of Chinese brands in the world.”
Xing Lei from AutoXing in the US also expressed concern: “If investors suspect fake sales, confidence in the industry could collapse.”
Overproduction has sparked a fierce price war, with even subsidized EVs being pushed overseas to break even quickly. William Ng of Huanyu Auto in Chongqing said his company makes up to 70 million VND in profit per EV when reselling in Central Asia.
Ng complained that freelancers, streamers, and TikTok influencers are flooding the zero-mileage car market, turning it into a multi-level marketplace, “selling wine one day, selling cars the next.”
Nhan Dan newspaper recently criticized the practice of selling zero-mileage cars domestically, but the government has remained silent on exports. Agencies such as the State Council and the Ministry of Commerce did not respond to requests for comment.
In contrast, the China Passenger Vehicle Association defended this as a strategy to overcome global trade barriers, especially in markets where Chinese brands are restricted from entering or are not widely known to consumers.
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