Nearly every major Chinese car maker is churning out electric cars these days in hopes of capitalizing on regulatory largess. One problem: Regulators are wary it is being misused.

One suspected strategy involves manufacturers selling faulty or incomplete cars to related parties who pocket the subsidies and then return the cars. That could explain why wholesale shipments of electric cars between January and November were 56% above retail sales, according to LMC Automotive data. By contrast, in the broader car market, wholesale...