Two car dealerships in Qinhuangdao, Hebei province, are at the centre of a suspected "zero-kilometre used car" fraud that has left more than 500 buyers unable to register the cars they paid for in full, according to a Huxiu report citing Times Weekly's investigation.
The companies, Zhongdian Auto and Mingtian Auto, both controlled by Li Zhe, sold new cars at discounts of about 20,000 yuan (around $2,800) below dealership prices, a sufficient spread to attract buyers in a market where new- and used-car prices are increasingly transparent. The catch was that ownership transfer was deferred for up to a year, with the sellers promising to settle any outstanding loans and complete the paperwork later. Each company had a registered capital of just 100,000 yuan (about $14,100).
How the '0-km used car' scheme worked
According to the report, the dealerships recruited "back-debtors" – people with old cars to scrap – to sign car-loan contracts in their own names. The cars were registered to these nominal owners, who were promised a 20,000-yuan government trade-in subsidy and were told the dealerships would repay the loans. The dealerships then sold the same cars to genuine buyers as "zero-kilometre used cars" – vehicles that are technically registered but have never been driven, allowing them to be resold as used.
This created a triangle of claims on each vehicle: a bank loan in the name of the nominal owner, a full payment from an end buyer, and a pending ownership transfer. The dealerships did not rely on profit from selling cars; instead they used the inflow of new buyers' money to service earlier loans and pay sales commissions, a cash-flow model that collapsed when new customers dried up.
In a notice sent to clients in September 2026, the two companies admitted that their operating losses had widened, cash flow had dried up, and they could no longer pay monthly instalments. They said they would stop payments from September 21 and did not rule out applying for bankruptcy liquidation or reorganisation.
What happens to the victims
One buyer told Times Weekly he paid 104,000 yuan (about $14,600) for a BYD Song Pro, about 20,000 yuan less than a 4S dealership would charge. Another said he paid 280,000 yuan (about $39,400) for a Mercedes E-class after being assured the car was free of liens, only to discover it still had an outstanding loan. Both now keep their cars parked indoors, afraid that lenders will tow the vehicles away. The report says more than 500 people may be affected, with estimated losses ranging from 50 million to 100 million yuan (about $7 million to $14.1 million), though the figures have not been independently verified.
Lawyers quoted in the report said Zhongdian and Li Zhe could face charges including contract fraud, loan fraud, subsidy fraud and illegally absorbing public deposits. For full-paying buyers, the core problem is that the vehicle is registered in someone else's name and carries an outstanding bank loan; the lender's mortgage right can follow the vehicle even after a sale. The advice is to file a police report quickly, seek victim status to participate in asset recovery, and consider civil litigation.
The case is a reminder that in China, vehicle prices are often quoted as guide prices before taxes and incentives, and any deal that undercuts the market by a wide margin while delaying ownership transfer carries significant risk, industry participants told the publication.
