China’s Ministry of Commerce has begun monitoring second-hand car sales to address market issues in the automotive sector, which is facing overcapacity and intense competition.

On May 27, 2025, the ministry met with industry groups, major carmakers, and second-hand trading platforms to discuss the sale of “used vehicles with zero mileage,”.

This sales model allows manufacturers to sell unused cars to second-hand dealers at reduced prices.

These cars are then marketed as pre-owned vehicles.

Dealers indicated that these unused vehicles are priced over 30% lower than new cars.

It is unclear if the Ministry of Commerce will permit this sales model to continue, although it is not currently deemed illegal.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s overcapacity crisis stems from years of aggressive government investment

The current price war and “zero-mileage used car” phenomenon reflect a predictable outcome of China’s massive automotive expansion strategy.

The Chinese government invested at least $58.3 billion in new energy vehicles between 2009 and 2017, primarily through buyer subsidies and infrastructure development 1.

This investment fueled rapid growth, with the number of auto-parts companies alone increasing from 4,205 in 2002 to 10,331 in 2008 2.

Today, only half of China’s EV production capacity (20 million units) is being utilized according to Goldman Sachs, creating intense pressure to move inventory through increasingly creative sales channels.

The situation aligns with warnings from analysts who previously cautioned about potential overcapacity due to excessive government support and competition among numerous manufacturers 3.

2️⃣ EV price wars follow predictable pattern of subsidized industry boom-bust cycles

The current automotive price war in China demonstrates how government-subsidized industries often follow similar trajectories toward margin compression.