Exclusive: China EV Brands Zeekr and Neta Boost Sales Through Insurance Scheme

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Chinese Electric Vehicle Brands Accused of Inflating Sales

Recent investigations have revealed that two prominent Chinese electric vehicle (EV) brands, Neta and Zeekr, have engaged in practices to inflate their sales figures in order to meet aggressive targets. These tactics, which involve booking sales before vehicles are actually sold to buyers, have raised concerns within the industry and among regulators.

According to documents reviewed by HAWXTECH and interviews with dealers and buyers, Neta booked early sales of at least 64,719 cars through a method involving insurance policies. This allowed the company to count these vehicles as sold before they were delivered to customers, thereby meeting monthly and quarterly sales targets. The practice was not previously reported, and it has now come under scrutiny as part of a broader industry reckoning.

Zeekr, a premium EV brand owned by Geely, also used similar methods to book early sales. In late 2024, the company reportedly arranged for cars to be insured before they were sold, particularly in the southern city of Xiamen. This involved its main dealer, state-owned Xiamen C&D Automobile, which facilitated the process. The practice is part of a growing trend known as "zero-mileage used cars" in the Chinese auto industry, where vehicles are registered as sold before reaching a buyer.

Industry Practices and Regulatory Scrutiny

The Chinese auto industry faces intense competition, exacerbated by a prolonged price war driven by overcapacity. To gain an edge, some automakers have resorted to inflating sales figures. Analysts and investors typically rely on two sets of data: wholesale numbers reported by automakers to industry associations and retail data compiled from registration records of mandatory traffic insurance.

This practice of booking sales before delivery has drawn attention from state media and government bodies. China's cabinet has pledged to regulate "irrational" competition, and central government agencies have held meetings with industry leaders to express concern. On Saturday, a publication run by the China Association of Auto Manufacturers reported that the industry ministry was planning to clamp down on the practice by banning cars from being resold within six months of being registered as a sale.

State media has also taken notice, with the China Securities Journal reporting that Zeekr had been selling cars with insurance already purchased to inflate sales. This marked the first time a specific automaker was named in such a report, signaling a more serious approach from authorities.

Impact on Buyers and Dealers

The practice of inflating sales has affected both buyers and dealers. Some buyers discovered that their cars already had insurance policies before purchase, leading to confusion and dissatisfaction. One buyer in Guangzhou reported that he was refused a refund despite feeling deceived. The China Securities Journal also questioned Zeekr’s unusually high sales in cities like Shenzhen and Xiamen, noting a surge in sales based on insurance registration records.

Dealers have also faced pressure. Neta, for example, arranged insurance policies for cars before sending them to dealers, allowing the company to book early sales. Dealers were instructed to transfer these policies to buyers, but many buyers were unaware of the insurance policies' origins until they expired.

Neta’s financial situation has deteriorated, with its owner, Zhejiang Hozon New Energy Automobile, entering bankruptcy proceedings in China last month. The brand’s sales have declined significantly since its peak in 2022, when it ranked as the eighth-largest maker of new EVs in China.

Responses and Ongoing Concerns

Zeekr has responded to the allegations by stating that the vehicles mentioned in the reports were for showroom display. It confirmed that the cars had been insured with mandatory traffic insurance, explaining that this was done to ensure safety during exhibition. However, it did not directly address whether these cars were counted as retail sales.

Analysts like Li Yanwei from the China Automobile Dealers Association have criticized the practice, calling it an attempt to embellish financial reports and achieve performance goals. He warned that such tactics are not advisable for the industry.

Pressure on dealers has also increased, with state media condemning the sale of zero-mileage used cars and urging automakers to set more reasonable sales targets. Dealer associations in the Yangtze River Delta have called for improved incentive policies, citing instances of falsified sales.

As the industry continues to face scrutiny, the question remains whether these practices will be curbed or if they will persist in the highly competitive EV market. For now, the focus is on ensuring transparency and fairness for both buyers and dealers.

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