By Eduardo Baptista
BEIJING (Reuters) -The Chinese practice of selling brand new cars as heavily discounted second-hand vehicles to get rid of inventory should be ended, the official newspaper of the country’s governing Communist Party said in an article published on Thursday.
The People’s Daily, which often signals the positions of China’s top Party leaders on a variety of issues, called for a crackdown on the practice, also known as zero-mileage used cars, just weeks after Great Wall Motor’s Chairman Wei Jianjun publicly condemned it and China’s commerce ministry met with Chinese automakers to discuss it.
While China’s Commerce Ministry did not make public its position, the People’s Daily struck a harsh tone, calling out the inflation of sales data motivating Chinese carmakers and urging “tough regulatory action” to restore market order.
“This disguised form of price cutting disrupts normal market order and is a striking example of the auto industry’s ‘involution’,” the People’s Daily said, using a term popular in China that describes a race to the bottom driven by excessive competition.
“Once market competition rules are properly enforced, ‘zero-mileage used cars’ won’t be able to run far — or for long.”
China is experiencing growing deflationary pressures as U.S. tariffs add to the gloomy mood in the world’s No.2 economy. Companies in sectors from fast food to high fashion have been cutting prices amid concerns about oversupply and sluggish household demand.
Price wars have gripped the Chinese auto industry in recent years, partly driven by slumping domestic consumption and overcapacity that has left many struggling to meet sales targets.
While the sale of zero-mileage used cars is seen by many Chinese automakers as an effective way of clearing out an ever-growing inventory of unsold cars, with domestic and overseas consumers lured by deep discounts on what are still brand new cars, the state-run newspaper listed a litany of negative effects caused by the practice.
“For manufacturers, this sales tactic may help reduce inventory in the short term but compresses profit margins, increases losses, and hinders investment in product quality and innovation — ultimately harming sustainable development,” the article said.
“For consumers, what seems like a good deal in terms of price comes with hidden risks: the loss of first-owner benefits, potential battery degradation, and steeper depreciation when reselling,” it continued, adding the practice undermines fair competition, distorts market data, and disrupts both new and used car markets.
The People’s Daily singled out manufacturers of electric vehicles as needing to move beyond “data worship” and competing on volume, in order to focus on product quality and technological innovation. It did not name any specific automakers.
The newspaper also listed measures Chinese regulatory authorities should adopt in order to prevent the sale of zero-mileage used cars, including strengthening oversight of second-hand vehicle registration, establishing a vehicle lifecycle tracking system, and strictly controlling the practice of immediate resale after registration.
(Reporting by Eduardo Baptista; Editing by Lincoln Feast.)
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