Five months before the scheme collapsed, a 26-year-old from Anyang in central China's Henan province drove more than 550 km (about 340 miles) to the coastal city of Qinhuangdao to buy a BYD Han. He paid 135,000 yuan (about $19,000) in full - nearly 20,000 yuan (about $2,800) less than the local BYD showroom was asking, according to an investigation by Phoenix Finance's Storm Eye desk carried on Huxiu. The salesman said the car could not be transferred immediately because the original owner was still waiting for China's trade-in subsidy, and the contract set a final transfer date in June 2027.
The buyer, identified only as Wang Haoxin, said he accepted the delay because his family was not well off and the saving mattered. Then, in late September, the dealerships stopped answering. Four days after a salesman assured him that transfers were being processed, Wang found the salesman's WeChat name changed and his promotional Douyin account deleted. The transaction had a name: one car, two sales.
According to the report, the two firms involved - Qinhuangdao Zhongdian Auto Trade and Qinhuangdao Mingtian Auto Sales - are linked. Business-registry data show both are controlled by the same individual, Li Zhe, and each has registered capital of only 100,000 yuan (about $14,100). On September 20, the firms sent customers a notice admitting that losses had widened, the cash-flow chain was broken and monthly loan payments could no longer be made, and saying they might apply for bankruptcy or restructuring.
Buyers then checked the registration records for the cars they had paid for and found they were registered in other people's names and carried outstanding bank or finance-company loans, with liens registered against them. Without releasing those liens, transfer is impossible. Several buyers told the investigation that roughly 1,000 to 2,000 vehicles and victims are involved.
How the scheme worked
The alleged trick exploited China's trade-in subsidy, a national programme that pays qualifying car owners who scrap an old vehicle and buy a new one - currently up to 20,000 yuan (about $2,800) for a new-energy vehicle and 15,000 yuan (about $2,100) for a petrol car, according to the report. The dealers recruited people who needed to scrap vehicles, signed them up for car-loan contracts and put them on the registration documents as nominal owners, so the bank loan was issued in their names. The same vehicle was then advertised as a '0 km' second-hand car and sold for cash to another buyer.
Each car therefore generated two incomes: the bank loan and the buyer's full payment. The dealerships used money from new customers to pay the earlier instalments and sales commissions. When new customers slowed, the chain broke, leaving both the nominal borrowers and the full-cash buyers stranded.
Buyer contracts contained promotional promises that were red flags in hindsight. One buyer was told transfer would take 6-13 months, and that the dealer would handle licence-plate registration, taxes and insurance at no extra cost. A contract seen by the report said the seller should complete transfer by November 14, 2026, and allowed cancellation with a full refund if transfer was late by more than 30 days. It made no mention of loans or liens. The same contract included a buy-back clause promising that if the buyer wanted to sell when the contract expired, the dealer would pay 60,000 yuan (about $8,500) for a car a normal dealer had quoted at 50,000 yuan (about $7,000).
Legal route
Other examples in the report include a BYD Song Pro bought for more than 100,000 yuan (about $14,100) that was still carrying a bank loan of 110,000 yuan (about $15,500) in the name of an owner from Luannan County, Tangshan. A 2025 Volkswagen Sagitar bought for 97,000 yuan (about $13,700) had a loan balance of 90,000 yuan (about $12,700) that was already a month overdue.
Gao Tongwu, a lawyer at Beijing Yingke Law Firm, told the investigation that the companies were likely to face charges of loan fraud and contract fraud. Because the same business model deceived two groups - banks and car buyers - investigators would probably examine the two losses separately and handle them as one criminal case. For Wang, the cost was personal: married two years with a child over a year old, he emptied his savings and borrowed to buy the car. He told the report he was now carrying about 200,000 yuan (about $28,200) in debt.
