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Investing.com -- China’s automotive industry has been artificially boosting sales figures through a government-supported grey market that registers new vehicles as "used" for export purposes, according to a Reuters investigation published on Tuesday.
These "zero-mileage" cars, which have never been driven, are reportedly being shipped to markets including Russia, Central Asia and the Middle East as used vehicles, allowing Chinese automakers to report growth while disposing of excess inventory that would be difficult to sell domestically.
The practice gained national attention after the head of Chinese automaker Great Wall Motor criticized the sale of zero-mileage used cars within China in May. On June 10, the People’s Daily newspaper condemned the domestic sale of these vehicles, calling for "tough regulatory action" to restore market order amid an ongoing price war.
While domestic sales of such vehicles face criticism, the export of zero-mileage used cars is actively encouraged by regional governments across China. Reuters claims it identified 20 local governments, including major export hubs like Guangdong and Sichuan, that have publicly documented their support for this practice.
The process works by having exporters purchase cars directly from manufacturers or dealers as they leave the assembly line. The vehicles are registered with Chinese license plates and immediately classified as second-hand for export. This allows automakers to record the cars as sold and recognize the revenue.
This practice helps local governments meet economic growth targets set by Beijing. Since export firms both purchase and sell each car, the transaction value is doubled compared to standard new or used car sales, artificially inflating GDP statistics.
The tactic indicates that China’s automotive industry, the world’s largest, is allowing production to exceed demand, fueling the extended domestic price war and prompting accusations of automotive "dumping" in international markets.