Consumers in China who paid in full for 'zero-kilometre used cars' - near-new new-energy vehicles (China's umbrella term for battery-electric, plug-in hybrid and range-extender cars) - are discovering they cannot transfer the title and that the vehicles are still mortgaged to banks, according to a report by Kuai Technology carried on Chinese EV news site D1EV. The report, published on 29 September, cites an investigation by China Media Group's radio news programme China Voice.
In the most extreme case reported, a buyer in Harbin, Heilongjiang province, paid 142,000 yuan (about $20,000) in full for a car on 1 August and had it towed away by the original owner on the night of 22 September - driven from Harbin back to Qinhuangdao in Hebei province. The buyer reported the incident to police and received an official case-acceptance receipt from the local police station.
Other buyers are sitting on debts they never took out. One, surnamed Lü, found in September that the car he had bought carried an 80,000 yuan (about $11,300) bank loan, with more than 60,000 yuan (about $8,500) still outstanding after 11 repayments. The sales contract did not mention any mortgage, and the salesperson had assured him on WeChat that the car was not a mortgaged vehicle, explaining that the original owner was claiming a new-energy vehicle subsidy and could only complete the transfer after six months, according to the report.
A buyer in Cangzhou, Hebei, paid 78,000 yuan (about $11,000) for a '99 per cent new' used car in December from the same Qinhuangdao company, and only learned on 20 September - when the company published a notice to customers - that the car was a mortgaged vehicle registered under someone else's name. In that notice, Qinhuangdao Zhongdian Automobile Trading told customers that its vehicle acquisition and holding costs were 'seriously inverted' with market prices, that operating losses had widened, and that its capital chain had broken. It said it would stop paying monthly instalments from 21 September and did not rule out applying to a court for bankruptcy liquidation or restructuring. For buyers whose cars have not been transferred, that raises the risk that financial institutions will repossess the vehicles once the loans default.
The grey chain behind 'zero-kilometre' cars
Zero-kilometre used cars normally trade openly in China: they are near-new cars with extremely low mileage, and a direct transfer of ownership can save buyers 10,000 to 20,000 yuan (about $1,400 to $2,800) compared with buying new from a dealership, according to industry insiders cited in the report. The problem arises when sales companies withhold the vehicle registration certificate, making a normal transfer impossible.
The cases point to an organised operation, the report said. A 'loan bearer' registers the car in their own name, takes out a bank loan and claims the national new-energy subsidy. A trading company then sells the vehicle to a genuine buyer below market price, uses the buyer's cash to cover the earlier loan interest, and delays the transfer to hide the mortgage. Buyers said sales staff told them the original owners had not bought the cars for practical use but had resold them immediately to obtain subsidies.
Legal exposure for dealers and 'loan bearers'
Xie Shu, a professor at China University of Political Science and Law, told China Voice that recruiting nominal owners in the name of trade-in subsidies, fabricating transaction documents to obtain bank loans and selling mortgaged vehicles to buyers for full payment could constitute contract fraud and loan fraud if the seller acted with an intent to illegally possess the funds. Lawyer Xue Yongkui added that a loan bearer who knew they were acting as a front and helped obtain the loans could be treated as an accomplice to loan fraud, facing both criminal and civil liability as well as damage to their personal credit record.
Lawyer Qiao Feng said the vehicle transfer agreements signed between the sales company and the new buyers were in effect consignment agreements, because the vehicles were registered under other people's names. If the mortgage or loan contract was added after the original owner sold the car, a buyer could apply as a third party to revoke it. Several victims have now filed complaints with the Economic Development Zone branch of the Qinhuangdao public security bureau, and police have opened a case, the report said.
