As China's auto industry faces deepening challenges of internal competition and overcapacity, the emergence of "zero-kilometer used cars," which effectively double as discounts on subsidized new vehicles, has drawn criticism from industry insiders and government officials, who may intervene to regulate them. Does the emergence of zero-kilometer used cars highlight China's deeper economic problems, or is it another example of the impact of the tariff war?
Overly competitive competition in China's auto industry has drawn attention from both the industry and the government. Great Wall Motors Chairman Wei Jianjun has highlighted the issue of disguised promotions involving the sale of registered and licensed new vehicles as used, describing this practice as an industry anomaly. Reuters reports that the Ministry of Commerce has convened a closed-door meeting with several automakers and relevant industry organizations to discuss the issue of used vehicles with zero mileage.
The term "zero-kilometer used cars" has also garnered widespread attention online, becoming a hot topic. One automotive blogger noted that recent car owners likely are familiar with the concept of zero-kilometer used cars. He explained that these so-called used cars, while distinguished from "resourced vehicles" and "tax-included vehicles," are merely names. They essentially represent new cars being sold as used, helping both manufacturers and dealers address inventory issues.
Blogger "Car Expert Asen" said, "From a manufacturer's perspective, the phenomenon of used cars with zero kilometres on them is simply due to heavy inventory pressure. With too many cars to sell, these cars are being packaged and sold specifically to dealers. Dealers are struggling to meet monthly, quarterly, and annual sales targets and need to boost sales quickly. Alternatively, the car manufacturers and dealers are facing bankruptcy and are looking to quickly recoup their capital by selling cars at a discount."
A blogger who specializes in selling used cars with zero kilometers has protested the injustice, saying that the price of a used car with zero kilometers is 60% of the price of a new car, or even half the price. This can provide more choices for young people who want to buy a car, and also solve the inventory problem for manufacturers. He does not agree that used cars with zero kilometers are a strange phenomenon or a chaos.
Blogger "Car Dealer Liu Boss" said, "Manufacturers have overcapacity. Who are they going to sell all those cars to? They can't just sit there or get dumped in a ditch, so here we are. One person can only buy three cars, but we, as a company, can package hundreds or even thousands of cars at once. We cover the license plates, taxes, and full payment for compulsory insurance at the land price, and they come with all the warranty coverage of a 4S dealership. The cars are all produced on the same production line, saving people money and preventing them from getting scammed. Is the zero-kilometer used car market a mess? Let's discuss it."
Analysis: Zero-kilometer used car subsidies are a lucrative scam, and some people will take the risk.
Current affairs commentator Fang Yuan said that used cars with zero kilometers of mileage not only illustrate the weak consumption capacity and serious internal problems in the Chinese market, but also show that there have been long-standing problems in the government's industrial policies. When the state uses large amounts of subsidies to support specific industries, corruption problems are bound to arise.
Fang Yuan said, "China's government-led industrial policies have led to overcapacity in sectors like automobiles and the new three major vehicles, resulting in a serious supply-side imbalance due to heavy subsidies. The emergence of used cars with zero kilometres on their mileage is a blatant attempt to defraud state subsidies by falsely claiming the cars have been sold, and then claiming subsidies and fraudulent subsidies from the government."
Fang Yuan said that as long as there is profit to be made, there will definitely be people who take risks. He believes that even if the Ministry of Commerce intervenes and requires car companies to regulate and rectify, it will be difficult to prevent the emergence of used cars with zero kilometers.
Wang Guochen, a full-time assistant researcher at the First Research Institute of the Chinese-Chinese Institution for Economic Research, said that used cars with zero kilometers of use reflect the problems caused by China's top-level design of over-investing in the manufacturing industry. He also said that allowing the problem of overcapacity to continue will only add more difficulties to China's economic situation.
Wang Guochen said, "These factories or businesses should go bankrupt if they can't sell their products. However, you haven't seen any collapses because banks have taken out massive loans to prop them up. This means the problem falls back on the banks, who simply can't get the money back. So, this problem gradually extends to, first, the banks. Everyone is concerned about China's banking risks. Secondly, the government is heavily investing in supporting businesses or providing subsidies, but these investments aren't generating the expected returns, leading to a continuous expansion of government debt."
Chen Songxing, adjunct professor at the Institute of National and Mainland Development at Chinese Culture University, also stated that China's economy is caught in a deflationary and liquidity trap. The worse the economy, the more conservative consumption becomes, making it more difficult to stimulate domestic demand and consumption. He stated that the US tariffs imposed on China represent a comprehensive suppression effort. While the impact on the automotive industry is not significant, a renewed tariff war would undoubtedly exacerbate the difficulties faced by the auto industry, which is already plagued by overcapacity. He also stated that due to the effects of the real estate market, overcapacity, and the tariff war, China's economy is unlikely to improve in the third quarter.
