Chinese electric vehicle manufacturers Neta and Zeekr have come under scrutiny for artificially boosting sales figures by insuring vehicles before actual buyer purchases, allowing them to meet aggressive targets amid fierce market competition. This revelation, detailed in a Reuters investigation, highlights ongoing challenges in China’s EV sector, where overcapacity and price wars pressure companies to manipulate data.

The Mechanics of the Sales Inflation Practice

Neta arranged insurance for at least 64,719 cars from January 2023 to March 2024 before delivering them to dealers, according to records reviewed by Reuters. This method enabled the company to register these vehicles as sold under Chinese industry practices, representing more than half of its reported 117,000 vehicle sales during that period. Dealers then transferred the policies to buyers, but some customers later discovered the coverage had started earlier than expected.

Zeekr employed a similar tactic in Xiamen during late 2024, partnering with state-owned dealer Xiamen C&D Automobile. The company insured and registered vehicles under subsidiaries’ names in December, booking sales before year-end. This contributed to a dramatic surge in Xiamen’s reported sales that month, reaching 2,737 units—over 14 times the monthly average. Data from the China Automobile Dealers Association indicated 2,508 of these went to companies, while Xiamen’s vehicle administration bureau recorded only 271 registrations for license plates.

Known in the industry as “zero-mileage used cars,” this approach stems from cutthroat competition in China’s auto market, the world’s largest. Automakers face chronic overcapacity, fueling a years-long price war that pushes firms to hit monthly and quarterly goals. However, it deceives buyers who often purchase what they think are new vehicles at discounts, only to learn the cars carry pre-existing insurance.

Regulatory Backlash and Industry Response

Chinese authorities are intensifying efforts to curb these practices. State media, including the China Securities Journal, publicly named Zeekr for selling pre-insured cars, interviewing buyers in Guangzhou and Chongqing who felt deceived and were denied refunds. The newspaper also flagged anomalies in Neta’s sales. On Saturday, a publication from the China Association of Auto Manufacturers announced plans by the industry ministry to ban resales within six months of registration.

The People’s Daily condemned the domestic sale of zero-mileage used cars last month, citing harms to the industry and consumers. This month, four dealer associations in the Yangtze River Delta called for reasonable sales targets, claiming automakers force falsified reporting. Analyst Li Yanwei from the China Automobile Dealers Association criticized the method on Weibo, stating, “This way of whitewashing performance is not advisable.” He believed firms used it to embellish financial reports and achieve goals.

Geely, Zeekr’s parent company, rejected the China Securities Journal’s report, with a spokesperson saying, “Geely firmly rejects the report put forward by the China Securities Journal.” Neither Zeekr, Neta’s owner Zhejiang Hozon New Energy Automobile, nor Xiamen C&D responded to Reuters’ requests for comment.

Implications for EV Makers and Buyers

This scandal raises questions about the reliability of sales data in China’s EV industry. Analysts track wholesale figures to dealers and retail data from insurance registrations to assess performance and inventory. Inflated numbers can mislead investors and distort market trends, especially as some zero-mileage cars end up exported as second-hand vehicles, though domestic volumes remain higher.

For Neta, the practice began in late 2022 to secure ending EV subsidies, according to a dealer who spoke anonymously. The brand’s sales peaked at 152,000 vehicles in 2022, ranking eighth among new EV makers, but dropped to 87,948 in 2024 (including 23,399 exports) and just 1,215 in the first quarter of 2025. Zhejiang Hozon entered bankruptcy proceedings last month, underscoring financial strains.

Zeekr, amid privatization by Geely Auto, offered incentives like a 3,000 yuan ($420) discount and a 10,000 yuan charging coupon for these cars, as one buyer reported. Building on that, dealers sold vehicles to customers in cities like Beijing and Chongqing. Buyers, however, often learned of the pre-insurance only upon policy expiration, eroding trust.

This episode signals a reckoning for the sector. As regulators tighten rules, EV companies may need to adopt transparent practices to sustain growth. For enthusiasts and owners, it underscores the importance of verifying vehicle histories, even for seemingly new purchases, to avoid unexpected issues with insurance or warranties. The crackdown could foster healthier competition, benefiting long-term innovation in electric mobility.