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Chinese State Media Takes Aim at ‘Zero-Mileage' Used Cars
(Bloomberg) -- The Communist Party controlled People's Daily newspaper has urged Chinese carmakers to stamp out 'zero-mileage' used vehicles in the latest rebuke to the auto industry amid growing concern unbridled competition could upend the market.
In a commentary published Tuesday, the paper said the practice of shifting almost new cars into the second-hand market was used by manufacturers and dealers to meet sales goals, but weakened their balance sheets and could lead to consumers losing proper rights when purchasing the vehicles.
'Zero-mileage' cars are essentially an extension of the industry's price war and reflect the fierce competition gripping the market. The newspaper also called for automakers to stop their singular focus on sales and put that drive into improving technology and services. It suggested consumers shouldn't just look at the price when shopping for cars, but also product quality and after-sale care provided.
The article follows a series of recent interventions from Chinese authorities on competition in the auto industry. Regulators have held at least two meetings in the past two weeks with manufacturers to address a range of topics, including 'zero-mileage' used cars. Auto executives last week were told to 'self-regulate' and not sell cars below cost or offer unreasonable price cuts. The scrutiny stepped up after market leader BYD Co. last month slashed prices by as much as 34%.
'Zero-mileage' used cars is a practice in which automakers that have failed to meet sales targets offload new vehicles to supply chain financing companies or second-hand car dealers. The essentially new vehicles then appear on the resale market with no mileage, while manufacturers record them as sales despite the cars not yet having reached an end-consumer.
The increased pressure has seen automakers trade barbs at each other. Great Wall Motor Co. founder Wei Jianjun first raised the issue of 'zero-mileage' cars in an interview late last month. He also said the industry had its own 'Evergrande' — referring to the giant real estate developer that collapsed under a mountain of debt — though didn't name any specific automakers.
At an industry forum held in the southwestern city of Chongqing on the weekend, Zhejiang Geely Holding Group Co. spokesman Victor Yang brought up allegations that some of BYD's plug-in hybrids may have used cheaper fuel tanks that breached emissions standards. These accusations were first raised by Great Wall two years ago, and rejected by BYD at the time.
BYD's general manager for brand and public relations, Li Yunfei, hit back at the accusations on social media. He stressed that BYD's vehicles comply with regulations and that a certain automaker based in Zhejiang province also used similar fuel tanks in the past. Geely is headquartered in Zhejiang's Hangzhou city.
Addressing the accusations that BYD is the auto industry's Evergrande, he said a Hebei-based company had tried numerous times to report BYD to the authorities for financial misconduct, but none were successful, showing the company didn't have these problems. BYD welcomed supervision between peers but reserved the right to pursue legal action against smearing and other malicious behavior, he wrote in a post on Weibo on Sunday, that he later deleted.
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