• China is dumping its zero-mile “used” EVs onto international markets.
• It turns out that local governments have been supporting the practice since 2019.
• Now, import laws in other countries are being tweaked to prevent the loophole from exploiting local markets.

We’ve finally got an answer to what happens when the world’s largest car market, China, builds more EVs than it can sell at home: It exports them. Breaking news, I know, but that’s just the tip of the proverbial iceberg. The story isn’t just that Chinese automakers are exporting cars, but that they’re exporting controversial zero-mile “used” EVs.

The whole concept here is a bit bonkers. If you haven’t been keeping up, Chinese automakers were recently called out for registering brand-new EVs with zero miles on the odometer just to be able to count them as sales. Government incentives are then passed around and the ministries in Beijing are happy that automakers are “selling” tons of cars.

Photo by: BYD

But, it turns out that despite these “used” EVs being a great value, automakers are having trouble offloading them to locals. According to Reuters, brands have figured out that they can quickly dispose of these cars simply by exporting them to other countries via a government-backed grey market.

Let’s dig into how it goes down.

The Zero-Mile Scam: How It Works

Once an EV rolls off the assembly line, it gets registered with a Chinese license plate. This is something normally done once the vehicle changes hands from the dealer to the consumer, similar to the registration process in the U.S.

The car is then quickly de-registered, labeled as a used car, and then fast-tracked for export to places like Russia, Jordan, or a myriad of other countries in Central Asia and the Middle East.

Local governments tally up a sale, the brand logs revenue, and the exporter pockets a nice little profit for themselves. In fact, revenue was so good that exporters were able to earn around $1,400 (10,000 CNY) in profit per car in 2022 and 2023. A major markup, given the exporter purchased the car for around $5,400 (40,000 CNY) on average.

Local Government Support

Photo by: Geely

It’s not like the local governments in China don’t know this is going on. And officials aren’t turning a blind eye, either—they’re actively supporting the efforts, according to Reuters. The investigation into the practice has found that at least 20 local governments in China have been quietly backing this practice since at least 2019.

Here’s an excerpt from the findings:

Local governments have embraced the practice as vital to meeting ambitious targets for economic growth set by Beijing, according to a Reuters review of local policy documents and state media articles.

Reuters has identified 20 local governments in China—including major export hubs like Guangdong and Sichuan—that have described their support for the export of zero-mileage used cars in publicly available government documents.

The tactics include 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 government documents showed.

Rubber-stamping paperwork is just the start. The report notes that local cities and districts actively supported the practice by allocating extra quotas for vehicle registration—something that’s often capped to mitigate traffic congestion and pollution—and even setting up free warehouses near land and maritime borders specifically for these zero-mile used cars.

Shenzhen’s local government reportedly even planned to expand support to help the city reach a target of 400,000 annual vehicle exports. The justification being that these types of exports would help to drive domestic sales.

China Is Torn On Whether Or Not An Overcapacity Problem Exists

If it walks like a duck, quacks like a duck, then it might be a duck. Despite these wild measures to meet increasingly high sales targets, not all of China’s automakers agree that there’s a problem with industry overcapacity.

In a 2024 interview with the Financial Times, Parker Shi, who leads international operations for Great Wall Motors, called overcapacity a “fake concept”:

“It is a fake concept,” Shi said on the allegations of overcapacity. “I don’t like that kind of judgment from the third party—they don’t know what is happening in my house.”

[…]

Shi, who previously led Great Wall’s operations in India, argued that car companies often designed factories with production capacity beyond their immediate requirements in case of “good business.”

Some factories [have] 70 to 80% utilization, some factories 60%, some factories 100%,” he said, adding that in “a lot of countries, official statistics are all wrong.” Great Wall plans to increase manufacturing of its cars overseas, closer to their foreign markets, he added.

However, this isn’t a sentiment shared by all Chinese automakers. Some, like Geely, have seen the writing on the wall and acknowledge that it’s an issue. Li Shufu, Geely’s founder, recently opened up on this when talking about the ongoing EV price wars in China, saying the industry is dealing with “serious overcapacity” at the moment.

That leaves us with a few important points to reflect on. Are there too many EV brands in China? Do moving sales targets force automakers to take drastic measures just to stay afloat? Is the global market even sustainable long-term with this model?

The World Is Catching On

China has been practicing this export scheme since 2019 all but unnoticed by the Western world. The countries being flooded with their cars, however, can see what’s going on.

In 2023, Russia effectively banned brands that had official distributors in its country from importing zero-mile used cars. Jordan is another country that is looking to combat the influx of cars by tweaking the definition of “used.”

Part of the reason for the crackdown is the popularity. People are catching on to the scandal and are profiteering on it—which, let’s be honest, is exactly what these automakers were doing as well. But when TikTokers and mom-and-pop dealers start to get in on it, that’s when governments draw the line for some reason.

Industry consultants see the move as a way for China to dump heavily subsidized vehicles overseas as its domestic supply is simply too full. Major markets like the U.S. and Europe have become cost-prohibitive to use as dumping grounds due to tariffs, meaning that automakers need to scramble to find new markets to offload onto in order to keep meeting export-inflated sales targets.

Consultants are now questioning how many of China’s EV sales are real. The fear is that the market’s actual take-rate is significantly inflated due to the export scandal, making it seem like domestic EV sales are higher than they are in reality

The bigger problem might be reputation. If China wants to start breaking into other markets legitimately, this isn’t going to win it any awards. Sure, it’s a cheap way to get subsidized cars into some markets—but what’s the long-term cost?