Neta Auto Faces Bankruptcy Crisis Amid Sales Fraud Allegations

Neta Auto, a once-prominent player in China's new energy vehicle market, is facing a severe bankruptcy crisis marked by allegations of sales fraud. Three years ago, Neta was the sales champion among new automotive forces, but it is now embroiled in a scandal involving 'headquarters dismantling, employee salary disputes, and dealer debt claims.' Recent reports have surfaced that Neta Auto engaged in falsifying sales numbers, further tarnishing its reputation. According to documents reviewed by Reuters and interviews with dealers and car buyers, Neta Auto reportedly inflated its sales figures by insuring vehicles before they were sold. This practice allowed the company to record sales prematurely to meet monthly and quarterly targets, a method that has been banned in the industry. Internal records and dealer disclosures indicate that Neta used advance insurance on vehicles waiting to be shipped to falsely report sales. Dealers revealed that Neta instructed them to treat early insurance as a sale, misleading customers about the terms of the insurance policies. Neta's sales surged in 2022, with over 152,000 units sold, making it the first new energy brand to exceed 150,000 in annual sales. However, questions remain about the legitimacy of these figures as relevant documents do not cover the reported 2022 sales. Industry insiders attribute Neta's downfall to former CEO Zhang Yong's failure to seize strategic opportunities, particularly when international giants like Volkswagen sought partnerships in China. As a result, Neta missed crucial market openings and now faces significant financial losses, with total losses reaching 18.37 billion yuan over three years. The company's performance has drastically declined, with sales plummeting to 87,948 units in 2024 and only 1,215 units sold in the first quarter of 2025. Neta Auto's parent company, Hozon New Energy, entered bankruptcy proceedings last month, indicating dire financial straits. With warehouses filled with unsold 'zero-kilometer' vehicles, the future of Neta Auto remains uncertain as it grapples with mounting debts and regulatory scrutiny.