Local authorities across China have increasingly turned to “zero-mileage” car exports as a shortcut to bolster auto sales figures and inflate regional growth statistics. By registering brand-new vehicles as used and shipping them overseas, municipal and provincial governments are helping prop up domestic production numbers while meeting ambitious economic targets set by Beijing. This strategy has not only reshaped the dynamics of China’s auto market but also introduced unintended distortions both at home and abroad.

Government-Backed Zero-Mileage Exports

In recent years, dozens of Chinese cities—from export hubs like Guangdong to inland provinces such as Sichuan—have rolled out special incentives to encourage the export of “used” cars that have never been driven. Under this model, newly assembled vehicles are sold to intermediary firms, registered as second-hand, and then immediately shipped to markets in Central Asia, the Middle East, and parts of Europe. Local governments facilitate the process by issuing extra export licenses, fast-tracking tax rebates, and even providing free warehousing near ports. In Shenzhen, officials set a target of exporting 400,000 vehicles of all types in 2024, explicitly counting zero-mileage units as a cornerstone of that goal. Similarly, Guangzhou relaxed its stringent vehicle registration caps—originally designed to curb pollution and congestion—to allow for a surge in exportable “used” gasoline cars, while Zhengzhou’s Xinmi district backed a private firm’s export drive with logistics subsidies and promotional events.

The zero-mileage export trade has become a critical lever for local leaders striving to hit GDP and industrial output benchmarks. In China’s centralized political system, meeting or exceeding growth targets can unlock additional fiscal transfers, infrastructure funding, and career advancement for officials, whereas shortfalls risk censure or demotion. By orchestrating sales of cars they would otherwise struggle to move domestically—particularly fuel-powered models amid the electric-vehicle boom—regional authorities effectively double-count a single vehicle’s transaction value. First, the automaker records a sale; then, the export intermediary books a second sale. That artificial uptick in turnover bolsters headline auto-sales numbers, even if actual consumer demand remains flat.

Municipalities have tied zero-mileage car exports to wider industrial strategies. Some offer low-interest loans or grant applications for local dealerships and logistics firms that specialize in the practice. Others stage international auto expos and trade fairs, featuring “used” Chinese cars alongside genuine second-hand imports, to attract overseas buyers. State media bombard local consumers with stories of record-breaking export figures, fostering civic pride in hometown plants. At the same time, official planning documents celebrate the dual role of this channel: ridding domestic markets of less-desired engine types and meeting export quotas critical for broader trade-balance objectives.

Market Distortions and International Pushback

Although local governments hail zero-mileage exports as a pragmatic solution, the practice has sown confusion and raised accusations of dumping. Overseas dealers—particularly in Russia and Central Asian republics—find themselves inundated with late-model sedans and SUVs that, while technically used, arrive in showroom condition. This flood of nearly new cars undercuts established importers and authorized dealerships, triggering protests and new regulations in some countries. In 2023, Russia effectively banned such vehicles from brands that already have domestic distribution networks, citing unfair competition. Jordan and other Middle Eastern markets introduced minimum in-country usage periods before a car can be deemed used, closing loopholes exploited by traders.

Back home, critics caution that zero-mileage exports mask deeper weaknesses in China’s auto sector. Government support for internal combustion engine (ICE) vehicles via this channel delays necessary transitions toward cleaner energy and more sustainable business models. Automakers reliant on state-driven export rebates may resist investments in electric-vehicle (EV) lines or emerging technologies. Industry consultants warn that once political attention shifts or rebates dry up, entire networks of dealerships and logistic providers could face collapse, leaving behind stranded inventory and unemployed workers.

Pressure on Automotive Supply Chains

The zero-mileage scheme also reshapes supply-chain dynamics. Parts suppliers and component manufacturers see artificial spikes in order volumes tied directly to export quotas rather than genuine end-user demand. This can lead to boom-and-bust cycles: factories ramp up production to meet local officials’ targets, only to cut back sharply when export windows close or overseas markets tighten regulations. For global auto-parts companies with plants in China, forecasting becomes fraught, as purchase orders hinge less on consumer preferences and more on unpredictable policy directives.

At the same time, logistics and shipping firms have become vital cogs in the network. Ports in coastal provinces report record‐high volumes of 20-foot containers labeled for auto exports, straining terminal capacity. Rail corridors bound for Central Asia see similar congestion, with trains shipping assembled vehicles across multiple provinces. While this activity has created jobs in transport and warehousing, it also heightens vulnerability to supply-chain disruptions—from COVID-19 lockdowns to geopolitical frictions—that can bring the zero-mileage export machine to an abrupt halt.

The Role of Data Transparency

Amid these distortions, observers are calling for greater transparency in auto-sales and export data. Independent analysts note discrepancies between domestic registration figures and actual sales to end-users. They recommend granular reporting that distinguishes true retail transactions from export intermediaries’ purchases. Some provincial auditors have quietly begun scrutinizing invoices and shipping records, identifying cases where a vehicle changes hands twice within days. Should Beijing mandate such oversight nationwide, the scope for zero-mileage manipulation could shrink significantly.

China’s central leadership has in recent months signaled an increasing focus on quality over quantity in economic metrics, urging local governments to prioritize innovation, green development, and consumer satisfaction rather than headline investment and export volume. In the auto sector, this translates into stronger support for EV manufacturing, charging infrastructure, and research into next-generation mobility solutions. Regions that once vied for export rebates on gasoline cars are now competing to host battery-cell gigafactories and pilot smart-vehicle projects.

Some auto firms are preempting these shifts by expanding EV lines and forging direct distribution partnerships overseas, circumventing local export intermediaries. They view zero-mileage sales as a stopgap—useful for clearing unsold inventory but ultimately unsustainable in a market that rewards technology leadership and brand reputation. As Chinese automakers gain more official dealerships abroad, the reliance on used-car channels may wane, replaced by traditional new‐car sales bolstered by after-sales service and financing deals.

The coming year will test the resilience of China’s automotive industry as central policymakers weigh the costs and benefits of zero-mileage exports. If local officials successfully pivot toward genuine market expansion—anchored by EVs and overseas brand-building—the distortions of the past decade may recede. However, if export incentives persist without fundamental reforms in data transparency and regulatory standards, China risks perpetuating a system where paper sales outpace real consumer uptake, leaving both producers and regional economies exposed to policy reversals and global scrutiny. The challenge for Beijing will be balancing short-term growth imperatives with the long-term goal of establishing Chinese automakers as technology innovators and reliable partners in the global market.

(Adapted from Reuters.com)