Chinese Car Industry Faces Crackdown on Zero-Mileage Used Cars: What It Means for the Market

China’s automotive industry, the world’s largest, is under intense scrutiny as regulators target a controversial practice known as “zero-mileage used cars.” These are brand-new vehicles registered as sold and then resold as heavily discounted “used” cars, often with zero miles on the odometer. This tactic, used by major players like BYD and Dongfeng Motor, has sparked a regulatory crackdown aimed at restoring market transparency and consumer trust. As of June 2025, state media and government bodies are pushing for stricter oversight, signaling a pivotal moment for China’s electric vehicle (EV) and traditional car markets. This blog post dives into the issue, its causes, implications, and what lies ahead for automakers and consumers.

What Are Zero-Mileage Used Cars?

Zero-mileage used cars are new vehicles that automakers register as sold, often to affiliated dealers or third-party platforms, to meet aggressive sales targets. These cars are then resold as “used” at significant discounts—sometimes up to 100,000 yuan ($13,800 USD)—despite having no mileage or wear. The practice emerged as a response to China’s fierce price wars and overcapacity, with manufacturers facing pressure to clear inventory amid slowing demand.

The People’s Daily, the official newspaper of China’s Communist Party, labeled this a “disguised form of price cutting” that disrupts market order and inflates sales data. Great Wall Motor Chairman Wei Jianjun highlighted the scale of the issue, noting that 3,000 to 4,000 vendors on Chinese used car platforms are involved.

Why Are Automakers Doing This?

Several factors drive the zero-mileage used car phenomenon:

1. Price Wars: China’s auto industry has been locked in a brutal price war, with companies like BYD slashing prices by up to 34% in May 2025 to maintain market share. This erodes profit margins, pushing firms to find creative ways to move inventory.
2. Overcapacity: With 3.5 million unsold vehicles in April 2025 and some manufacturers operating at less than 50% capacity, automakers are desperate to reduce stockpiles.
3. Sales Targets: Aggressive sales goals, often tied to government subsidies or corporate benchmarks, incentivize registering new cars as sold to boost reported figures.
4. Subsidies and Loopholes: Dealers have exploited trade-in subsidies, offering up to 20,000 yuan ($2,800 USD), by registering new cars as used to claim funds, depleting subsidy programs in cities like Zhengzhou and Chongqing.

Regulatory Response

In May 2025, China’s Ministry of Commerce summoned automakers, including BYD and Dongfeng, along with industry bodies like the China Association of Automobile Manufacturers (CAAM), to discuss the issue. On June 10, 2025, the People’s Daily called for a crackdown, urging “tough regulatory action” to curb the practice. Proposed measures include:

• Enhanced Oversight: Strengthening second-hand vehicle registration monitoring to prevent immediate resale.
• Lifecycle Tracking: Establishing a vehicle lifecycle tracking system to ensure transparency.
• Stricter Controls: Limiting the ability to resell newly registered vehicles.

The State Administration for Market Regulation (SAMR) and Ministry of Industry and Information Technology (MIIT) are also enforcing broader rules, such as banning misleading terms like “autonomous driving” in ads and mandating that 48% of vehicles sold in 2026 be new energy vehicles (NEVs).

Impact on the Auto Industry

The crackdown has far-reaching implications for China’s auto sector:

1. Automakers Face Financial Pressure

The zero-mileage tactic compresses profit margins and hinders investment in innovation. Wei Jianjun compared the situation to the 2021 Evergrande crisis, warning of potential collapse for some firms. Shares of BYD and Zhejiang Leapmotor dropped 3.1% after news of the regulatory meeting, reflecting investor concerns.

2. Consumer Trust at Risk

Consumers buying zero-mileage used cars face risks like reduced warranty coverage, unclear resale value, and potential liens. This erodes trust, which is critical as EVs and hybrids now account for over 50% of China’s vehicle sales.

3. Market Consolidation

The regulatory push is accelerating consolidation in the EV sector. Of 500 EV startups, only about 50 are expected to survive by 2030. Giants like BYD, Nio, and Huawei, with scale and innovation, are poised to dominate, while smaller players struggle.

4. Global Implications

China’s auto industry, which produced over 9 million vehicles in 2024, faces additional challenges from U.S. tariffs (up to 145% under President Trump) and domestic deflationary pressures. The crackdown may stabilize prices but could increase costs for manufacturers, impacting their global competitiveness.

What It Means for Consumers

For consumers, the crackdown offers both opportunities and challenges:

• Pros: A more transparent used car market could emerge, with clearer pricing and better warranty protections. Budget-conscious buyers may still find deals on zero-mileage cars in the short term.
• Cons: Tighter regulations may lead to higher prices for new vehicles as automakers adjust sales strategies. Subsidy fraud crackdowns could also limit access to trade-in incentives.

The Road Ahead

The zero-mileage used car issue highlights deeper challenges in China’s auto industry: overcapacity, unsustainable price wars, and reliance on subsidies. The government’s push for stricter oversight aligns with its broader goals of promoting NEVs and consumer protection. However, loopholes remain, and enforcement will be key to curbing the practice.

For investors, the regulatory shift presents opportunities in EV giants like BYD, which has leveraged its 21 affordable models to capture 35% of China’s EV market in 2024. Nio and Xpeng, with their focus on premium EVs and autonomous tech, also show promise.

China’s crackdown on zero-mileage used cars marks a turning point for its auto industry. By addressing deceptive sales tactics, regulators aim to restore market order and protect consumers, but the transition will be painful for some automakers. As the EV sector consolidates and global pressures mount, only the most innovative and compliant companies will thrive. Stay tuned as this story unfolds, reshaping the future of China’s automotive landscape.

External Links for Further Reading

1. Reuters: Chinese state media calls for crackdown on ‘zero-mileage used cars’ – In-depth coverage of the People’s Daily article and regulatory measures.
2. Bloomberg: China Summons Top Carmakers Over ‘Zero-Mileage’ Used Vehicles – Details on the Ministry of Commerce’s meetings with automakers.
3. CnEVPost: Chinese regulator gathers automakers to discuss zero-mileage used car sales – Insights into the Shanghai meeting and industry perspectives.
4. EVXL: China’s Auto Industry Faces Scrutiny Over “Zero-Mileage” Used Car Sales – Analysis of the impact on the EV market and consumers.
5. CarNewsChina: Exposing China’s ‘zero-kilometre used cars’ – Explores consumer risks and industry challenges.