Japan Halts Lucrative Used-Car Trade with Russia

TOKYO, Oct 2 – Japan’s recent decision to significantly limit used-car sales to Russia has abruptly halted a trade valued at nearly $2 billion annually. The trade had been thriving, particularly in the wake of sanctions related to the conflict in Ukraine, as per trade data and market participants.

In early August, Japan’s government imposed restrictions on exports, allowing only subcompact cars to be sent to Russia. This move abruptly cut off a lucrative trade involving used Toyotas, Hondas, and Nissans through a network of brokers and smaller ports, particularly Fushiki, a key export hub on the Sea of Japan.

While this action effectively ended Russia’s access to Japan’s major source of used cars, it had a ripple effect on the second-hand car market within Japan, leading to decreased prices. Brokers have been scrambling to redirect vehicles to other regions, especially right-hand drive markets in New Zealand, Southeast Asia, and Africa.

Russia’s demand for second-hand cars from Japan had surged after major global automakers, including Toyota, scaled back their operations following Moscow’s invasion of Ukraine. By the previous year, Russia had been purchasing over a quarter of Japan’s used-car exports at an average price of almost $8,200. This marked a significant increase from 2020 when Russia accounted for about 15% of Japan’s used-car exports, at half the price.

Before Japan imposed stricter sanctions, the sales were projected to surpass $1.9 billion for the entirety of 2023, according to trade data.

In the first eight months of the year, more than half of the 303,000 used cars imported by Russia came from Japan, as per figures from the Russian analytical agency Autostat. In comparison, during the same period, Russia purchased 606,950 new cars, primarily Russian and Chinese brands.

Toyama-based SV Alliance, a two-year-old car export business, was significantly affected, experiencing a 70% decline in business. The company had been part of the boom that facilitated the export of approximately 6,500 used cars to Russia each month from Japan’s Fushiki port.

“Business is down about 70%, and we’ve had to let a couple of people go because there isn’t enough work,” said Olesya Alekseeva, a logistics coordinator at SV Alliance.

AFFORDABLE OPTIONS FOR RECYCLERS
Japan has been a prominent used-car exporter for decades. A mandatory inspection system within Japan raises maintenance costs for used cars, making them relatively expensive for customers in Japan. On the contrary, financing costs for new car purchases are low.

This scenario has propelled an export industry that has distributed hundreds of thousands of Japanese-purchased cars across regions, from Malaysia to Mongolia and Pakistan to Tanzania.

Takanori Kikuchi, a director for automotive trade policy at Japan’s Ministry of Economy, Trade, and Industry, stated that the government is closely monitoring the impact of the new sanctions.

In April of the previous year, Japan initially banned the export of luxury vehicles to Russia, later extending the prohibition to heavy trucks in June.

Under the recent sanctions, dealers can still export smaller cars, such as the Toyota Yaris or the Honda Fit, to Russia.

Element Trading, a used-car dealer in Niigata prefecture bordering Toyama, reported a decrease in Russia’s share of its business from a peak of over 50% to below 20%, according to chief executive Wataru Nishiwaki.

In August, the number of used cars available surged by over 20% compared to the previous year, while average vehicle selling prices dropped by 7%, according to preliminary data from the auto auction house USS.

The price decline has been positively received by some. Battery recycling firm 4R Energy has benefited from the decreasing used-car prices, including the Nissan Leaf, mentioned Chief Executive Yutaka Horie. Lower prices have provided a notable advantage to the joint venture between Nissan and trading house Sumitomo, enabling them to secure supplies more efficiently.

(Note: Currency conversion provided at the end of the article: $1 = 149.3000 yen)