In 2022, Japanese cars were the kings of the used vehicle market in Russia, making up a whopping 90% of all imported cars. Fast forward to 2024, and that number has plummeted to just 47%. This drastic drop is surprising, especially considering how essential the used car trade is to the livelihoods of many people in Vladivostok, a city in Russia’s Far East. During a recent visit, a correspondent from The Insider discovered how international sanctions, resulting from Russia’s invasion of Ukraine, have drastically changed the car market.
Chop and Ship: How Cars Are Smuggled into Russia
When the war began in February 2022, many major car companies, including Renault and Nissan, pulled out of Russia. This led to a sharp decline in the import of used foreign cars. Lots that used to be filled with vehicles were left empty, and the prices of cars skyrocketed due to fears of spare parts shortages.
However, as the market began to recover, traders found clever ways to keep their businesses alive. They started focusing on importing cars that weren’t affected by sanctions. To dodge high taxes, some dealers began a process known as “chop and ship.” This involves cutting cars into pieces before sending them to Russia, allowing them to be declared as parts instead of whole vehicles, which significantly lowers import duties. Once the cars arrive in Vladivostok, they’re reassembled.
For instance, one dealer, Artem, shared a story about a time when a whole car was mistakenly loaded onto a ship without being chopped up. When it reached the dock, a customs officer noticed and hit them with a huge tax bill that nearly doubled the car’s original cost. Such incidents highlight the risks involved in this underground trade.
How Traders Work Around Sanctions
Traders in Vladivostok have found ways to import cars that are technically banned. Some use third countries like South Korea to smuggle in sanctioned vehicles. A trader named Ivan explained that he knows people in Japan who are willing to send cars through these countries to avoid detection. Despite the risks, many in the business continue to find loopholes.
However, the Japanese government is trying to crack down on these activities. They have even contacted Ivan about his car imports, warning him to stop. But like many others in the industry, Ivan remains defiant, believing that the laws don’t hold much power over their trade.
The Rise of South Korean and Chinese Cars
As Japanese cars began to disappear from the market, South Korean and Chinese vehicles started taking their place. South Korea, despite its own restrictions on car exports, saw an influx of used cars into Russia in 2022 when the value of the won dropped. But now, with fewer Korean cars available, Russian buyers are increasingly turning to Chinese brands.
These vehicles are gaining popularity, especially since they are more familiar to Russian drivers, who prefer left-hand drive cars. Many people have no choice but to switch to these brands, as well-known companies like Audi and Renault have exited the market.
The Dark Side: Theft and Smuggling
However, the world of used cars in Vladivostok is not just about legitimate trade. Many cars that come from Japan are packed with hidden treasures, from cash and electronics to valuable items like jewelry. Workers in the port know how to find these hidden goods, which often go unreported.
Moreover, there’s a darker side to this smuggling operation. Due to strict sanctions on luxury goods, many traders use cars to smuggle in expensive items like alcohol and electronics. This means that alongside cars, other contraband goods are often transported, making the used car trade-in Vladivostok not just a business but also a means of navigating the complicated landscape of sanctions.
A Shifting Landscape
As the used car market continues to evolve in Russia, it reveals a lot about the resilience and adaptability of those involved in the trade. Despite international sanctions and economic hurdles, traders in Vladivostok have shown they can navigate a shifting landscape, using creativity and connections to keep their businesses running.
The future of the used car market in Russia remains uncertain, but one thing is clear: the game has changed, and the players are adapting to survive in this new reality.
