The influx of cheap Chinese EVs will likely slow down

From the newsletter 

China, the world's largest manufacturer of electric vehicles, has introduced stricter regulations for used car exports, targeting the growing trade in zero-mileage vehicles being sold abroad as second-hand cars. Many of these new “used” cars are being increasingly brought to Africa by Chinese EV companies and are comparatively cheaper than other brands. 

• EV manufacturers in China have been overproducing cars to claim state subsidies, then sold the cars abroad as used vehicles at cut prices. Closing this loophole will reduce production of cheap EVs.

• Africa could suffer the most from China’s policy move. EVs from Chinese companies have started to flood the market.  

More details

• The “zero-mileage” scheme involves EV manufacturers registering a new car as used immediately after it's manufactured, often with the support of local governments who offer incentives like tax breaks and streamlined export procedures.  

• China has now decided to crack down on this practice in a move that could have far-reaching repercussions globally, especially in the EV industry which the country dominates. China’s Ministry of Commerce will now require mandatory third-party inspections and service history verification for all exported used vehicles. 

• The move by China follows a 58.5% surge in used car exports in 2024 to 436,000 units valued at $6.88 billion. The rules aim to standardise international sales while addressing domestic overcapacity issues linked to automakers registering unsold new cars as “used” to clear inventory.

• Under the updated framework taking effect immediately, exporters must comply with two key national standards: WM/T 8-2022 for used passenger vehicles, and WM/T 9-2022 for commercial vehicles and trailers.

• Each vehicle now requires certification from accredited inspection agencies, with reports submitted to customs. The Ministry of Commerce has also mandated adherence to destination-country import rules, including emissions compliance declarations. 

• With the restrictions in place, major importers of Chinese used vehicles such as Africa, Russia, and Central Asia will likely see reduced volumes of ultra-low-mileage cars, which are often cheap. This means cars coming from China could now be costlier. 

• The grey-market EVs allowed importers in Africa to offer vehicles well below market prices. The crackdown by China will raise compliance costs, reduce supply, and increase the prices of used EVs. This could hurt price-sensitive consumers, particularly in ride-hailing, fleet, or boda boda segments. 

Our take

• To offset any potential increase in EV prices, African governments should fast-track EV import and tax reforms by reviewing import duties, VAT, and registration fees for used and new EVs. they should also encourage imports of certified, affordable EVs through formal channels to ensure safety and affordability.

• With imports tightening, Africa should expand local assembly of EVs and pilot retrofitting ICE vehicles to electric. This can create jobs, lower costs, and reduce foreign dependency, while boosting local technical capacity. 

• Indonesia, Thailand, India, Turkey, and Latin America are emerging EV exporters. African importers and startups should build new trade relationships to stabilise supply and reduce vulnerability to Chinese policy shifts.