China’s Ministry of Commerce is meeting with some of the country’s biggest automakers to discuss whether the industry is using a loophole to mask weakening sales.
The meeting, which was set to take place yesterday afternoon, also included industry bodies such as the China Automobile Dealers Association and online car distribution channels, according to a memo shared by Li Yanwei (李顏偉), an official at the dealers’ association, on Weibo.
A representative for Dongfeng Motor Group Co (東風汽車) said officials from the company attended the gathering. Invitations were extended to carmakers on Sunday and the event wasn’t an inquiry.
Photo: AFP
‘Zero-mileage’ cars came to public attention last week, when Great Wall Motor Co (長城汽車) chairman Wei Jianjun (魏建軍) warned of an unhealthy outlook for China’s car industry following a years-long price war.
The practice sees automakers that have failed to meet their sales targets distribute new vehicles to supply chain financing companies or used car dealers, according to Li. These essentially new cars then appear on the resale market with no mileage and manufacturers record them as sales despite not reaching the end-consumer, he wrote on Weibo.
While that would be viewed as fraud in places like the US, it’s not clearly regulated in China, he said. He urged the Chinese Ministry of Commerce and China Securities Regulatory Commission to stamp out the practice.
It’s unclear which companies are involved, but Wei estimated that as many as 4,000 second-hand sellers post ‘zero-mileage’ cars on online platforms.
He pointed to the practice as indicative of the chaos engulfing China’s auto sector, and warned the industry is facing its own China Evergrande Group (恆大集團) — the defaulted builder that’s an emblem of the country’s years-long property crisis. He declined to identify the company he alluded to.
China’s auto sector has been embroiled in an extended price war that’s taking a major toll on carmakers.
BYD Co (比亞迪) saw shares slump about 10 percent in the first two days of this week after announcing price reductions of as much as 34 percent on Chinese models until the end of next month. The market leader last month posted its slowest year-on-year growth in vehicle deliveries in more than four years.
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