China’s auto industry has inflated car sales for years through a burgeoning government-backed grey market that registers new cars right off the assembly line and then ships them overseas as “used” vehicles.
These so-called “zero-mileage” cars have never been driven but they are being exported as used to markets like Russia, Central Asia and the Middle East, allowing Chinese automakers to show growth and to dispose of cars that it would be difficult to sell domestically, according to a Reuters review of government documents and interviews with five auto dealers and car traders.
“This is the outcome of an almost-four-year price war that has made companies desperate to book any sales possible,” said Tu Le, Michigan-based founder of consultancy Sino Auto Insights.
Sound like a standard case of misaligned incentives in a planned economy. As far as those go this is quite benign.
Central government sets targets for selling cars domestically, so of course every car is going to be sold domestically. Even those sold internationally.
If I understand the explanation, its like when an author (or their proxies) buys thousands (millions) of copies of their own book to make them “sold” so that they can raise their standing on the “Best Seller’s List”.
It never occurred to me that authors would do that, but of course they would.
That’s what politicians, famous people, and anyone who works with a charity does.
For decades Ford Europe has had an employee scheme whereby they can get brand new hugely discounted cars every few months. This extended to their families and friends. Each employee could request several vouchers from Ford which are then used at a Ford dealership in exchange for a car on incredibly good finance payments. This was designed to boost the number of registered cars straight from the assembly line.
This sort of thing has always been standard practice in the automotive industry. The point is, this won’t work to paper over the cracks in China with their massive oversupply.
In my western country, car dealers do the same in order to meet their sales target
“Inflated car sales” aka ‘sold more product’
“Dispose of cars” aka ‘sold internationally’
“Price war” aka ‘free market’
I love it, the capitalists can’t win even in their own game!
Production is subsidized by the government, so it’s not a free market.
What absolute nonsense. It’s a free market, the unsubsidized companies are just at a market disadvantage. You’re just whining about the competition working together to compete better.
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So like whats the problem? New car for used car prices? I dont understand
The Chinese government is paying huge incentives for every car sold. This is their way of gaming the system to subsidize their industry and undercut non-Chinese auto makers.
I guess they just want to win more than the competition does.
This sort of “win” can end in two way, either the average car price is being lowered and benefiting consumer, or low level employees getting shoved for the lower margin of profits. Or both. Either way, it mean more new car on the road.
Undercutting competitors to establish a monopoly.
In other words, they competing and winning. Sounds like the competition really needs to do better.
The Chinese EV industry is overdue for consolidation. There are too many players chasing too few customers. This could be done in a relatively orderly fashion that leaves a few big players that are internationally competitive. Or they can keep kicking the can down the road and hope for the best, until the inevitable collapse. Gee, I wonder which option they’ll choose.
