Chinese EV giants Zeekr and Neta face scrutiny for inflating sales figures through an insurance scheme, raising questions about industry practices
China’s electric vehicle (EV) market, the largest in the world, thrives on fierce competition. However, recent reports have exposed a troubling practice by two prominent brands, Zeekr and Neta.
These companies allegedly inflated their sales figures by exploiting a loophole in insurance registration. This scandal, uncovered by Reuters, has sent shockwaves through the industry, raising concerns about transparency and trust.
How Was the EV Sales Inflation Uncovered?
The issue came to light when the China Securities Journal flagged unusually high sales for Zeekr in Shenzhen and Xiamen in December 2024. For instance, Zeekr’s reported sales in Xiamen surged to 2,737 vehicles, 14 times its monthly average. Similarly, Neta’s sales figures showed anomalies, prompting a deeper investigation.
As reported, both companies arranged mandatory traffic insurance for cars before they were sold, allowing them to book sales early.
Neta alone inflated sales by over 64,719 vehicles from January 2023 to March 2024, more than half its reported 117,000 sales during that period. This practice, known as selling “zero-mileage used cars,” exploits China’s registration system to meet aggressive sales targets.
Why do you think companies might resort to such tactics in a competitive market? Could pressure from investors or internal goals play a role?
What Are the Implications for the EV Industry?
The EV sales inflation scandal has far-reaching consequences. First, it erodes consumer trust. Buyers may question the integrity of brands like Zeekr and Neta, especially since these vehicles were sometimes registered under dealership subsidiaries rather than directly to actual customers.
For example, in Xiamen, only 271 of Zeekr’s 2,737 reported sales were registered for license plates, suggesting many cars remained unsold. This discrepancy highlights a gap between reported and actual sales, which may potentially mislead investors and analysts.
Moreover, the scandal exposes systemic issues in China’s EV market. Intense competition and overcapacity have fueled a price war, pushing companies to manipulate figures to appear successful.
The China Automobile Dealers Association criticized these practices, with analyst Li Yanwei calling them “not advisable” for financial reporting. Meanwhile, state media like People’s Daily condemned the harm caused by zero-mileage used car sales, citing damage to both the industry and consumers.
What steps could regulators take to prevent such practices? How might this affect the global perception of Chinese EV brands?
The fallout is already evident. Geely Auto, Zeekr’s parent company, saw its shares drop by up to 4% in Hong Kong after the news broke. Neta’s owner, Zhejiang Hozon, entered bankruptcy proceedings in 2024, underscoring financial strain.
As China’s EV market faces scrutiny, brands must prioritize transparency to rebuild trust. For consumers and investors, this scandal serves as a reminder to look beyond reported figures and demand accountability. The road ahead for Zeekr and Neta will depend on how they address these revelations and adapt to a more transparent market.
