China’s Auto Industry Falsely Boosting Vehicle Sales with Fake Numbers

China’s automobile industry has been engaging in deceptive practices by inflating vehicle sales numbers through fake sales data. The fraudulent scheme involves registering new vehicles straight off the assembly line, labeling them as used vehicles, and exporting them overseas. This unethical practice has allowed Chinese automakers to achieve high sales volumes by effectively counting the vehicles twice. The vehicles, despite having no added mileage, are being shipped abroad as “used vehicles,” portraying inflated sales numbers.

This nefarious practice has been prevalent in China for years and has raised concerns within the auto industry. Investigations into this deceitful tactic revealed that Chinese car manufacturers, in collusion with regional governments, are benefiting from this fraudulent activity. Chinese consumers have also reaped the rewards by purchasing these essentially new vehicles at almost half the original price. The practice of registering new vehicles and then selling them as used has been a boon for regional governments trying to meet economic growth targets and dealerships striving to achieve sales goals imposed by carmakers.

The double-counting of sales transactions involving both new car sales and used car exports has significantly inflated China’s gross domestic product (GDP). The Chinese government has taken a stand against this unethical practice by condemning the sale of “zero-mileage” used cars domestically and calling for regulatory measures to curb this exploitative behavior. However, the practice continues to benefit various stakeholders, creating economic activity that is recorded twice in official records.

The China Passenger Car Association justified this deceptive practice as a strategic workaround to overcome global trade barriers, particularly in markets where Chinese brands face entry restrictions or lack consumer recognition. This loophole has been exploited by Chinese automakers to export a significant number of zero-mileage vehicles, with most being combustion vehicles that are less attractive to Chinese consumers who prefer electric vehicles (EVs). Subsidized EVs are also being exported for quick financial gains.

Several countries, especially those with local carmakers to protect, are beginning to crack down on these deceptive practices. For example, Russia implemented a ban on zero-mileage imports from brands with official distributors in the country to safeguard local car manufacturers. Other countries are tightening definitions of “used cars” to prevent Chinese companies from manipulating this loophole. These efforts aim to safeguard and protect domestic auto industries against unfair competition and deceptive practices.

The fraudulent scheme in China’s auto industry came under global scrutiny when the CEO of Great Wall Motor publicly criticized it. Chinese automaker BYD, once recognized as the world’s largest EV maker, has faced consequences from these deceptive practices. BYD has experienced a decline in production and expansion, reduced shifts at factories, and delayed plans for new production lines. The company’s aggressive push for increasing sales and releasing new models has backfired after being embroiled in a price war resulting in rising inventory levels and dealership closures.

BYD has significantly expanded its presence in Brazil, offering low-priced EV options to Brazilian consumers. The surge in China-built vehicle imports to Brazil has raised concerns among industry and labor groups, alarmed at the potential negative impact on domestic auto production and employment. The import of vehicles from Chinese automakers like BYD has the potential to disrupt the local auto industry and may hinder job creation. Industry stakeholders are calling for measures to address the influx of Chinese vehicle imports and protect domestic production in Brazil.