According to trade data and market participants, Japan’s decision to restrict the sale of used cars to Russia has put a stop to a thriving trade worth almost $2 billion a year. This trade had flourished despite sanctions imposed on Russia for its actions in Ukraine.
In the beginning of August, the Japanese government prohibited the export of anything other than subcompact cars to Russia. This ended a profitable underground market for trading used Toyotas, Hondas, and Nissans through intermediaries and smaller ports, specifically Fushiki, a major export center on the Sea of Japan.
The sanctions on Russia have caused a decline in the availability of used cars, resulting in lower prices for second-hand cars in Japan. This has caused brokers to rush to export vehicles to other regions, particularly those that drive on the right side of the road, such as New Zealand, Southeast Asia, and Africa.
The demand for used cars from Japan in Russia increased significantly after major car companies, such as Toyota, scaled back their operations due to Moscow’s invasion of Ukraine.
In the previous year, as sanctions were being enforced in other areas, Russia increased their purchase of used cars from Japan to over 25%, with an average cost of nearly $8,200. This was a significant increase from 2020, when Russia only bought around 15% of Japan’s used-car exports at a price that was half of the current average.
According to trade data, the sales were projected to exceed $1.9 billion for the entire year of 2023. However, Japan’s implementation of stricter sanctions caused this trajectory to change.
According to data from Autostat, Japan accounted for over half of the 303,000 used cars imported by Russia in the first eight months of this year.
Autostat’s data revealed that during the same time frame, sales of new cars from primarily Russian and Chinese brands totaled 606,950, which is a lower number compared to the figure mentioned earlier.
The company SV Alliance, located in Toyama, has been exporting cars for two years. During the war, there was an increase in demand for used cars and on average, 6,500 were sent to Russia each month from Japan’s Fushiki port. This port is approximately 800 km (500 miles) away from Russia’s Vladivostok and can be reached within two days by cargo ship.
According to Olesya Alekseeva, a logistics coordinator at SV Alliance, our business has declined by approximately 70% and we have had to lay off a few employees due to a lack of workload.
Discounted vehicles for those who recycle.
Japan has been a leading used-car exporter for decades. A system of mandatory inspections pushes the cost of maintaining used cars higher for customers in Japan. Financing costs for new car purchases, by contrast, are low.
The outcome: a thriving export industry that has transported hundreds of thousands of vehicles from Malaysia to Mongolia and Pakistan to Tanzania, all originally bought in Japan.
The Ministry of Economy, Trade and Industry’s director for automotive trade policy, Takanori Kikuchi, stated that the government is monitoring the potential impact of the newly imposed sanctions.
In April of last year, Japan prohibited the export of luxury vehicles to Russia. In June, they also added a ban on exporting heavy trucks.
Under the latest penalties, dealers are granted permission to ship compact vehicles, like the Toyota Yaris or Honda Fit, to Russia.
According to Wataru Nishiwaki, the CEO of Element Trading, a pre-owned car dealership in Niigata prefecture near Toyama, the percentage of their business coming from Russia has decreased from over 50% to under 20%.
According to initial data from auto auction house USS, the amount of pre-owned cars available for purchase increased by over 20% in August compared to the previous year. However, the average price of vehicles being sold decreased by 7%.
Some people were happy about the decrease in price. Yutaka Horie, the CEO of 4R Energy, a battery recycling company, stated that the declining prices of used cars, such as the Nissan Leaf, have had a positive impact on their business.
According to Reuters, the joint venture between Nissan and Sumitomo trading house will have a better chance of obtaining supplies due to lower prices.