In Depth: China’s Growing Trade of Unused ‘Used’ Cars Threatens Automakers’ Global Expansion

At first glance, Chinese automakers seeking relief from a saturated, competitive domestic auto market might see expanding overseas sales as the solution. However, exporting new vehicles is complex and costly, involving the establishment of dealership networks, logistics, after-sales service, and strict government licensing only available to manufacturers or authorized exporters [para. 1][para. 2]. In 2021, some companies spotted a loophole—exporting new vehicles as "used." This approach, involving "zero-mileage used cars," circumvents many formal requirements, lowers costs, and enables cars that are new except in name to be sold abroad at substantial discounts yet still with healthy profits. This strategy has grown so common that about 80% of China’s used-car exports in 2024 fell into this category, totaling nearly 440,000 vehicles, a dramatic rise from just 15,000 in 2021. Projections for 2025 exceed 500,000 units [para. 3][para. 5].

This boom has prompted regulatory scrutiny, as authorities recognize that the practice distorts sales data, undermines the international reputation of Chinese auto brands, and spreads the fiercely competitive dynamics of the domestic market overseas [para. 6]. The Chinese government is tightening export rules, with a new policy requiring pure electric vehicles to obtain the same export licenses as traditional and hybrid vehicles from January 2025. However, critics worry the policy does not explicitly address "zero-mileage used cars," allowing the practice to persist and potentially undermine regulatory effectiveness [para. 8][para. 10].

The loophole is rooted in longstanding industry practices, where dealerships would buy new cars to inflate their sales targets and earn bonuses, later selling them as "used" to exporters. This practice initially expanded rapidly in Russia following the exit of Western automakers after the 2022 invasion of Ukraine, then spread to Southeast Asia, the Middle East, and Africa, lured by the potential to sell vehicles at two to three times their Chinese market price. It is fueled by domestic price wars and government incentives for new-energy vehicles, such as tax exemptions and subsidies [para. 13][para. 16][para. 19].

However, the practice has sparked criticism within the industry. Executives from leading automakers have labeled the proliferation of "unused used" cars as chaotic and damaging, particularly for brands that have invested in overseas presence and formal export channels. These legitimate exporters cannot compete with the lower prices of zero-mileage used cars, hurting their margins and market position. Yet, for smaller, financially strained automakers, this trade offers a crucial revenue stream amid domestic overcapacity and falling profits, often encouraged by local subsidies geared toward sustaining production lines [para. 21][para. 23][para. 24][para. 26][para. 27].

Overseas, the influx of these vehicles has intensified price competition, eroded margins, and raised concerns about after-sales service—often non-existent for grey-market exports—leading to dissatisfied customers and reputational risk for all Chinese brands due to the difficulty in distinguishing among manufacturers. Foreign markets, such as Russia and the UAE, have begun to push back, with complaints of market disruption and tax evasion, and some have blocked registrations of unauthorized vehicles [para. 29][para. 31][para. 33][para. 35][para. 37][para. 39].

Regulators are considering various measures to close loopholes, including delaying the transfer of ownership after registration, administrative export limits, and further verification requirements. Industry groups advocate for a cautious approach, recalling the damaging loss of consumer trust and market share suffered by Chinese motorcycle exporters in Southeast Asia during the 1990s [para. 41][para. 44][para. 48].

Experts agree that the underlying issue is structural overcapacity and artificial incentives in China’s domestic market. They recommend gradually reducing subsidies and tax breaks while developing transparent, large-scale used-car platforms based on international best practices. As the market matures, most believe the grey-market exports will naturally decline, making way for a more sustainable and reputable Chinese presence in global auto markets [para. 52][para. 54][para. 58][para. 61][para. 63][para. 65].