HONG KONG (Reuters Breakingviews) - It always pays to be cautious when it comes to used-car dealers. Kaixin Auto, which sells second-hand vehicles online in China, is no exception. The company, whose name translates as “happy”, has experienced a 2,300% surge in its stock price over the last two months. The rally warrants a closer inspection. For one thing, Kaixin seems to be along for a magical ride powered by investor enthusiasm for electric vehicles. Some good news for Tesla, including its upcoming inclusion in the S&P 500 index, has helped charge the market caps of Nio, Li Auto and Xpeng, too. For the spillover to reach $453 million Kaixin sounds like a stretch. It is not a manufacturer and has little else in common with Tesla. A plan unveiled earlier this month to hitch up with Haitaoche, an e-commerce outfit specialising in imported cars, also warrants scepticism. This new partner says it wants to expand into electric vehicles, but provided little detail on the strategy. Nor is it clear how Kaixin can help, considering that green models have questionable resale value as their batteries age. Kaixin’s dizzying stock rally also overlooks other structural and performance quirks. The chief executive and chief operating officer resigned even before the merger has been completed. It reported a decidedly unhappy $69 million net loss last year as sales tumbled by almost a fifth. Its parent, social-media network Renren, used a shell company to take the company public in 2018, with performance and stock-price incentives that allow it to gradually increase its stake. Only 2% of its shares are freely traded, according to Eikon, as Haitaoche prepares to take a controlling 51% interest. It’s all more than enough reason to blanch at Kaixin’s sticker price.