China EV brands Zeekr, Neta inflated car sales using insurance scheme

BEIJING – Chinese electric vehicle (EV) brands Neta and Zeekr inflated sales in recent years to hit aggressive targets, with Neta doing so for more than 60,000 cars, according to documents reviewed by Reuters and interviews with dealers and buyers.

The companies arranged for cars to be insured before they were sold to buyers, the documents show, enabling them under Chinese industry car registration practices to book sales early so they could hit the monthly and quarterly targets, the dealers and buyers said.

Neta booked early sales of at least 64,719 cars through this method from January 2023 to March 2024, according to copies of records it sent to dealers, seen by Reuters. That was more than half the sales of 117,000 vehicles it reported over the 15 months. Neta’s effort to book sales early has not been previously reported.

Zeekr, a premium EV brand owned by Geely, used the same method to book early sales in late 2024 in the southern city of Xiamen through its main dealer there, state-owned Xiamen C&D Automobile, according to dealers, buyers and sales receipts seen by Reuters.

Shares of Geely Auto, which is taking Zeekr private, fell as much as 4 per cent in Hong Kong on July 21.

Analysts and investors tracking China’s auto industry gauge performance and estimate inventory levels with two sets of sales data. Wholesale numbers reported by automakers to the industry association show sales from automakers to dealers, while retail data compiled from registration records of mandatory traffic insurance shows the sales to users.

Vehicles booked as sold before reaching a buyer are called “zero-mileage used cars” in the Chinese auto industry. The practice has emerged out of cut-throat 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 industry faces a moment of reckoning, with state media calling out the zero-mileage car practice, China’s Cabinet pledging to regulate “irrational” competition, and other central government bodies organising meetings with the industry’s largest players to express concern about such methods.

On July 19, Auto Review, a publication run by the China Association of Auto Manufacturers, reported that the Industry Ministry was planning to clamp down on the practice by banning cars from being resold within six months of being registered as a sale.

Auto Review said in a statement to Reuters on July 21 that its report “contained inaccurate descriptions related to the Ministry of Industry and Information Technology and the other relevant authorities concerning zero-mileage used cars”, adding that these parts had been deleted from the original story.

Also on July 19, Chinese state media reported that Zeekr had been selling cars with insurance already purchased to inflate sales, the first such naming of a specific automaker in a sign that the Chinese authorities are getting more serious about the crackdown.

In a front-page story, the China Securities Journal newspaper interviewed Zeekr car buyers in cities such as Guangzhou and Chongqing, who the newspaper said had found that their cars already had insurance policies before they were sold.

They said they were refused refunds, even though they felt they were deceived.

The newspaper questioned Zeekr’s unusually high sales in the cities of Shenzhen and Xiamen in December. Its reported sales based off insurance registration records in Xiamen surged to 2,737 that month, more than 14 times its monthly average.

The China Securities Journal also raised questions over Neta’s sales, saying it showed anomalies. Reuters is reporting for the first time details of how Neta inflated sales.

Zhejiang Hozon New Energy Automobile, which owns Neta, and Xiamen C&D did not respond to requests for comment on July 19. A spokesperson for Geely said: “Geely firmly rejects the report put forward by the China Securities Journal.”

Zeekr said on July 20 on its account on Chinese social media platform Weibo that the vehicles mentioned in the media reports were for showroom display. It confirmed that the cars had been insured with mandatory traffic insurance, saying that it was for ensuring safety while being exhibited, and that they were still legally new when sold to buyers.

It did not directly answer Reuters’ questions on whether it had counted them as retail sales. However, its Weibo statement said it had also set up a special team to investigate the sales issues raised in the media reports, without going into further details.

Mr Li Yanwei, an analyst with the China Automobile Dealers Association, said on Weibo on July 19 that he believed Zeekr and Neta carried out such practices to embellish their financial reports and achieve their performance goals.

“This way of whitewashing performance is not advisable,” he added. REUTERS