China plans crackdown on zero-mileage used car sales

China’s industry ministry is planning to ban the resale of cars within six months of their initial registration as part of efforts to combat sales of so-called zero-mileage used cars, an industry association publication reported on Saturday.

Zero-mileage used cars have emerged in China as a result of the uniquely cutthroat competition for sales in the world’s largest auto market, which is reeling from a brutal, years-long price war caused by chronic overcapacity.

The practice involves insuring a new vehicle before it is sold, allowing automakers and their dealers to meet sales targets.

But it can create hassles for customers.

Auto Review, a publication run by the China Association of Automobile Manufacturers, reported the plan in an editorial published on its WeChat account. It said that the China Automobile Dealers Association, another industry group, had separately proposed a code system for exports of used cars.

The editorial added that Chery and BYD, were among companies planning to hold dealers accountable for violations, including licensing cars before they are sold.

The measures, if enforced, would mark the first policy action taken by the Chinese government to stop the practice, which became a nationwide issue after Great Wall Motor CEO Wei Jianjun called it out in May.

Since then, there have been several signs China’s central government was preparing a crackdown, from a Communist Party newspaper condemning zero-mileage used cars last month to the country’s cabinet pledging on Friday that it would control “irrational” competition in the domestic auto industry.