TOKYO (International Trade Council) - Japan has recently taken measures to limit the export of used cars to Russia, significantly impacting an industry worth nearly $2 billion annually. This trade had thrived amidst the backdrop of ongoing international sanctions related to the Ukraine conflict, as evidenced by trade data and market participants.
In early August, the Japanese government introduced a ban on the export of all but subcompact cars to Russia. This move effectively cut off a lucrative trade channel for used Toyotas, Hondas, and Nissans, involving a network of brokers and smaller ports, with Fushiki, an export hub on the Sea of Japan, being especially affected. While this step eliminated Russia's primary source of used cars, it also led to a reduction in second-hand car prices within Japan. Consequently, brokers have been actively seeking alternative markets, with a particular focus on right-hand drive markets in New Zealand, Southeast Asia, and Africa.
The surge in Russia's demand for second-hand Japanese cars occurred after major global automakers, including Toyota, scaled back their operations in response to Moscow's invasion of Ukraine. By the previous year, with sanctions tightening elsewhere, Russia was purchasing over a quarter of Japan's used car exports at an average price of nearly $8,200. This figure represented more than double the 2020 price when Russia accounted for approximately 15% of Japan's used car exports. Trade data indicates that these sales were on track to surpass $1.9 billion for the entire year of 2023 before Japan imposed stricter sanctions.
According to figures from the Russian analytical agency Autostat, over half of the 303,000 used cars imported by Russia in the first eight months of the year originated from Japan. In contrast, Autostat data showed that 606,950 new cars, primarily of Russian and Chinese brands, were sold over the same period.
SV Alliance, a car export business based in Toyama, had played a part in this thriving trade, shipping an average of approximately 6,500 used cars to Russia each month through July from Japan's Fushiki. The port is located about 800 km (500 miles) from Russia's Vladivostok, allowing for a two-day voyage by cargo ship. Olesya Alekseeva, a logistics coordinator at SV Alliance, lamented that their business had declined by about 70%, leading to layoffs due to a lack of work.
Japan has been a major player in the used car export industry for decades. A system of mandatory inspections raises the maintenance costs of used cars for customers in Japan, while financing options for new car purchases remain affordable. Consequently, this has given rise to an export industry that has seen hundreds of thousands of vehicles initially purchased in Japan now in use on roads spanning from Malaysia to Mongolia, and from Pakistan to Tanzania.
Takanori Kikuchi, a director for automotive trade policy at Japan's Ministry of Economy, Trade, and Industry, commented that the government is closely monitoring the impact of these new sanctions. Japan initially imposed a ban on exporting luxury vehicles to Russia in April of the previous year, subsequently adding a prohibition on the export of heavy trucks in June.
Under the latest sanctions, dealers are still permitted to export smaller vehicles like the Toyota Yaris or the Honda Fit to Russia. Nevertheless, Element Trading, a used car dealer in Niigata prefecture bordering Toyama, noted that Russia's share in its business had dropped from a peak of over 50% to below 20%, according to Chief Executive Wataru Nishiwaki.
Preliminary data from the auto auction house USS indicates that the number of used cars available surged more than 20% in August compared to the previous year, while average vehicle selling prices experienced a 7% drop. Some industry players have welcomed this price decline, including battery recycling firm 4R Energy, which reported a "significant" positive impact from declining used car prices, including the Nissan Leaf, according to Chief Executive Yutaka Horie. Lower prices provide the joint venture between Nissan and trading house Sumitomo with a broader opportunity to secure supplies.
