China automakers are registering new vehicles and then selling them abroad as used vehicles, despite essentially no mileage being added to the vehicle, which allows them to report high sales volumes. Recent investigations show that China’s auto industry has inflated car sales for years (possibly since China first allowed used cars to be exported to other countries in 2019) by registering the new cars right off the assembly lines with Chinese plates and shipping them overseas as “used vehicles.” At first, these ”zero mileage” cars were dumped on China’s used car market as a price war was in effect. But as the domestic market became oversupplied with the zero-mileage vehicles, automakers exported them abroad to markets like Russia, Central Asia, and the Middle East.
The Chinese government decided to condemn the practice of selling zero-mileage used cars domestically in the People’s Daily newspaper on June 10. It also condemned the price war that was putting the Chinese auto industry at risk and called for regulation. But automakers, regional governments, and consumers were benefiting from zero-mileage used cars. According to Autoevolution, the practice was allowing regional governments to meet ambitious targets for economic growth set by the Chinese government, and dealerships to obtain bonuses by meeting sales targets imposed by carmakers. Consumers benefited as they were buying the cars at about half the original price.
As each transaction involves both a “new car sale” and a “used car export,” the economic activity is being recorded twice, raising China’s gross domestic product (GDP). According to Reuters, this is done by creating extra licenses for the 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. The China Passenger Car Association “defended the practice as a strategic workaround for global trade barriers, particularly in markets where Chinese brands face entry restrictions or lack consumer recognition.”
A consultant from the China Automobile Dealers Association estimates that 90% of the 436,000 used passenger and commercial vehicles China exported in 2024 were zero-mileage cars, with most being combustion vehicles, which are less attractive for Chinese customers as they prefer electric vehicles (EVs) because they come with generous government-funded purchase subsidies. But even subsidized EVs are being exported to overseas markets for quick cash. William Ng of Huanyu Auto in Chongqing said his company earned as much as $1,400 in profit per vehicle by reselling EVs bought for about $5,600 in Central Asia.
Some countries are pushing back, especially where they have local carmakers to protect. For instance, in 2023, Russia issued a government decree to ban zero-mileage imports from brands that have official distributors in the country, such as Chery, Changan, and Geely. Other countries are also beginning to tighten definitions of “used cars” to prevent Chinese companies from using this loophole. For example, Jordan is mandating a waiting period after a car is registered before it can be classified as used.
The practice came to the forefront globally in May, when the CEO of Chinese carmaker Great Wall Motor, Wei Jianjun, criticized it. In an interview, Wei mentioned “the Evergrande of the auto industry,” (in reference to the collapse of the real estate company) when discussing, implicitly, Chinese automaker BYD. In recent months, BYD has slowed its production and expansion pace by reducing shifts at some factories in China and delaying plans to add new production lines, according to Reuters. BYD is grappling with rising inventory even after offering deep price cuts in the price war. It has cancelled night shifts and reduced output by at least a third of capacity at four or more factories. Previously, BYD had overtaken Tesla as the world’s largest EV maker by aggressively increasing production and speeding up the rollout of new and less expensive models.
BYD sold 4.27 million cars last year, mostly in China, targeting a nearly 30% increase in sales to 5.5 million for 2025. Its recent price incentives, which reduced the starting price of its cheapest model to $7,800, triggered price cuts from its rivals. BYD dealers have an average inventory of 3.21 months, the highest among all brands in China, whereas the inventory level industry-wide was 1.38 months. One large BYD dealer has gone out of business, with at least 20 of its stores found to be deserted or shut. In the first five months of this year, BYD sold 1.76 million vehicles, of which around 20% were exported.
BYD’s Sales to Brazil
BYD is offering Brazilian car buyers relatively low-priced EV options. However, according to Reuters, Brazilian auto-industry officials and labor leaders worry that the import of cars from BYD and other Chinese automakers will set back domestic auto production and hurt jobs. The world’s largest car-carrying ship — with the equivalent of 20 football fields of vehicles — completed its maiden journey in late May to dock in Brazil’s Itajai port. That shipment was the fourth of BYD’s ships to dock in Brazil this year, totaling around 22,000 vehicles.
China-built vehicle imports in Brazil are expected to grow nearly 40% this year, to about 200,000, accounting for about 8% of total light-vehicle registrations. Industry and labor groups claim China is exploiting Brazil’s temporarily low tariffs to increase its exports rather than investing to build Brazilian factories and create jobs. The groups are lobbying Brazil’s government to accelerate by a year a plan to increase Brazil’s tariff on all EV imports to 35% from 10%, rather than gradually phasing in higher levies.
Analysis
The practice of double-counting automobile sales is just the type of market manipulation that one should expect to exist in a country controlled by a regime like the Chinese Communist Party (CCP). When the CCP forces automakers and local governments to meet arbitrary production and sales quotas based on policy goals rather than market demand, these groups will attempt to save face by manipulating data rather than face the wrath of CCP officials. These exploits lead to worse outcomes for the Chinese people in the long run as they distort market signals regarding which investments are worthwhile, leading to lower economic growth.
China has long subsidized BYD to gain a competitive advantage in international EV markets, which has allowed the company to increase its share of Brazil’s auto market. While China may believe that it’s positioning itself to benefit from a future of electrification and net-zero goals, in reality, it’s setting itself up for failure in the long run by propping up a flawed product. As we explained in When Government Chooses Your Car, EVs suffer from issues such as battery lifespan and range that make them inferior to gas cars for most uses. Subsidies and net-zero regulations might lead to the proliferation of EVs for some time, but these issues mean that the industry will continue to depend on these expensive policies remaining in effect to exist at its current scale.
