China has decided to put the brakes on exports of so-called "0 km used cars," which have increased amid bloody competition among automakers. A 0 km used car is technically a new car, but after going through a formal registration process upon release, it is sold immediately as used.
According to Caixin and other Chinese media on the 16th, China's Ministry of Commerce, the Ministry of Industry and Information Technology, the Ministry of Public Security, and the General Administration of Customs (Customs Service) announced on the 14th a "notice on strengthening the management of used car exports" containing these measures. The policy takes effect on Jan. 1 next year, with a grace period until then.
The reason 0 km used cars have rapidly increased is that the number of automobile brands has swollen to dozens under the authorities' strategic nurturing. As competition overheated, new car production exceeded domestic demand in China, and inventories have continued to pile up in recent years.
According to official data from the China Association of Automobile Manufacturers, from January to October this year, China's auto production reached 27,692,000 units and sales reached 27,687,000 units, both up more than 10% from a year earlier. Of these, new energy vehicles (electric, hydrogen, and hybrid) recorded production of 13,015,000 units and sales of 12,943,000 units. Caixin noted, "0 km used cars first pioneered sales channels overseas and were one of the avenues for Chinese automakers to ease inventory and overproduction pressure."
0 km used cars increased from 15,000 units in 2021 to 436,000 last year. This year, the number is expected to exceed 500,000. However, China does not have official statistics showing the export situation of "0 km used cars."
The problem is that exports of 0 km used cars do not include separate after-sales service (A/S). As a result, they can easily draw consumer complaints and damage the image of the brand and the reputation of China's auto industry. Caixin reported that, for this reason, rumors have circulated in the industry for months that Chinese authorities were preparing countermeasures.
The newly announced policy does not impose an outright ban on exports but significantly tightens the conditions. Going forward, exporting 0 km used cars will require the consent of the automaker.
Li Huai, chief executive officer (CEO) of Highsunche Technology, told Caixin, "'0 km used cars' are a product of self-defeating competition," adding, "Chinese automakers are facing survival pressure, and because production volume is the most important indicator guaranteeing market status, they have little choice but to blindly increase it."