Exclusive: China EV brands Zeekr, Neta inflated car sales using insurance scheme

Chinese EV brands Neta and Zeekr are accused of inflating sales by pre-insuring vehicles before actual customer purchase, allowing them to book early and meet aggressive targets; Neta alone reportedly booked over 64,000 such 'zero-mileage used cars.' This practice, driven by fierce market competition and overcapacity, significantly distorts reported sales figures and has prompted a regulatory crackdown, including plans to ban resales within six months of registration. The revelations underscore transparency issues and heightened regulatory risk for investors in China's competitive EV sector.

Analysis

Chinese electric vehicle manufacturers Zeekr and Neta have been systematically inflating sales figures by pre-insuring vehicles to recognize revenue before a final sale, a practice known as selling 'zero-mileage used cars.' The scale of this activity is substantial; Neta reportedly inflated its sales by at least 64,719 cars between January 2023 and March 2024, accounting for over half of its reported volume during that period. Similarly, Zeekr, a premium brand under Geely (0175.HK), exhibited highly anomalous sales data, with volume in Xiamen surging over 14 times its monthly average in December 2024, a figure state media has publicly questioned. This practice is a direct consequence of intense overcapacity and a brutal price war in the Chinese auto market, forcing companies to meet aggressive targets. The situation has now attracted significant regulatory scrutiny, with state media outlets like the China Securities Journal explicitly naming Zeekr, and the industry ministry planning a clampdown by banning car resales within six months of registration. The financial distress is evident, as Neta's parent company entered bankruptcy proceedings last month, while Geely has officially rejected the state media reports but has not commented on the specific findings regarding pre-insuring vehicles.

Key Decisions for Investors

• Investors should treat the reported sales figures from Zeekr (ZK) and parent Geely (0175.HK) with extreme skepticism, as the allegations undermine the integrity of key performance metrics used for valuation.
• The impending regulatory crackdown on 'zero-mileage used cars' presents a significant near-term risk, potentially leading to a sharp downward revision of reported sales and revenue for implicated automakers once this channel is closed.
• Given the high negative sentiment (-0.8 for ZK) and clear governance red flags, it may be prudent to reduce exposure or implement hedging strategies for positions in Zeekr and Geely until there is clarity on the full extent of the practice and the impact of new regulations.
• This news highlights systemic risks across the hyper-competitive Chinese EV sector; investors should apply greater scrutiny to the sales data of all players, as the pressure to inflate performance is widespread.