FYI: China’s excess EV production finds an outlet in international markets as zero-mile “used” cars, with local government backing the gray market exports.
China’s Zero-Mile EV Dilemma: A Global Impact
As the world’s largest car market, China is producing electric vehicles faster than local consumers can purchase them. The solution? Export. However, the twist lies in exporting "used" cars that paradoxically have never been driven—a method that has raised eyebrows in the automotive industry.
Breaking Down the Export Strategy
Chinese automakers have been registering brand-new EVs as "sold" to claim governmental incentives. Once these vehicles hit the market as used, despite having zero mileage, they are exported via a state-endorsed gray market to regions such as Russia and the Middle East, keeping international sales figures robust.
Behind the Loophole
The export process begins with the vehicle being registered locally, in a manner similar to the registration process in other countries. Quickly de-registered, these cars are then exported, bypassing usual market practices. This allows local governments to report higher sales figures, with exporters earning significant profits, approximately $1,400 per car in recent years. Purchasing these vehicles at about $5,400, the financial upside is clear.
Local Government Support and Economic Growth
Surprisingly, local governments are not merely aware of this scheme—they actively support it. At least 20 local authorities have been recorded assisting these practices. According to Reuters, the backing involves everything from issuing extra export licenses to setting up dedicated warehouses for these zero-mile vehicles.
Industry Divided Over Overcapacity
The Chinese automotive industry stands divided on whether overcapacity is a critical issue. While some voices, like Parker Shi of Great Wall Motors, dismiss concerns, others acknowledge the challenge. Li Shufu, founder of Geely, openly recognizes the strain overcapacity places on the market.
A Global Response Emerging
Countries receiving these cars are starting to react. Russia has begun to ban the import of zero-mile vehicles from brands with local distributors. Similarly, Jordan is revising its "used car" definitions to mitigate this influx.
The Real Cost
While the short-term gains from shipping subsidized cars abroad may seem lucrative, the long-term effects on China’s international reputation are less positive. Industry analysts question the integrity of reported sales figures, suspecting they paint an overly rosy picture of domestic EV demand.
Conclusion
As international scrutiny heightens, China faces a critical decision. The balance between exploiting export opportunities and maintaining credibility in global markets will shape the future of its automotive sector.
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William Kouch, Editor of Automotive.fyi
