*

China's ruling Communist Party mouthpiece condemns

"zero-mileage

used cars"

*

Resale of brand new cars as second-hand cars a growing

problem

in China's car industry

*

People's Daily newspaper says practice used by Chinese car

makers to inflate sales data

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State-run newspaper urges stricter car tracking and other

"tough

regulatory action"

By Eduardo Baptista

BEIJING, June 10 (Reuters) - The Chinese practice of

selling brand new cars as heavily discounted second-hand

vehicles to get rid of inventory should be ended, the official

newspaper of the country's governing Communist Party said in an

article published on Thursday.

The People's Daily, which often signals the positions of

China's top Party leaders on a variety of issues, called for a

crackdown on the practice, also known as zero-mileage used cars,

just weeks after Great Wall Motor's Chairman Wei

Jianjun publicly condemned it and China's commerce ministry met

with Chinese automakers to discuss it.

While China's Commerce Ministry did not make public its

position, the People's Daily struck a harsh tone, calling out

the inflation of sales data motivating Chinese carmakers and

urging "tough regulatory action" to restore market order.

"This disguised form of price cutting disrupts normal market

order and is a striking example of the auto industry's

'involution'," the People's Daily said, using a term popular in

China that describes a race to the bottom driven by excessive

competition.

"Once market competition rules are properly enforced,

'zero-mileage used cars' won't be able to run far - or for

long."

China is experiencing growing deflationary pressures as U.S.

tariffs add to the gloomy mood in the world's No.2 economy.

Companies in sectors from fast food to high fashion have been

cutting prices amid concerns about oversupply and sluggish

household demand.

Price wars have gripped the Chinese auto industry in recent

years, partly driven by slumping domestic consumption and

overcapacity that has left many struggling to meet sales

targets.

While the sale of zero-mileage used cars is seen by many

Chinese automakers as an effective way of clearing out an

ever-growing inventory of unsold cars, with domestic and

overseas consumers lured by deep discounts on what are still

brand new cars, the state-run newspaper listed a litany of

negative effects caused by the practice.

"For manufacturers, this sales tactic may help reduce

inventory in the short term but compresses profit margins,

increases losses, and hinders investment in product quality and

innovation - ultimately harming sustainable development," the

article said.

"For consumers, what seems like a good deal in terms of

price comes with hidden risks: the loss of first-owner benefits,

potential battery degradation, and steeper depreciation when

reselling," it continued, adding the practice undermines fair

competition, distorts market data, and disrupts both new and

used car markets.

The People's Daily singled out manufacturers of electric

vehicles as needing to move beyond "data worship" and competing

on volume, in order to focus on product quality and

technological innovation. It did not name any specific

automakers.

The newspaper also listed measures Chinese regulatory

authorities should adopt in order to prevent the sale of

zero-mileage used cars, including strengthening oversight of

second-hand vehicle registration, establishing a vehicle

lifecycle tracking system, and strictly controlling the practice

of immediate resale after registration.

(Reporting by Eduardo Baptista; Editing by Lincoln Feast.)