Home Business Japan halts profitable used-car trade with Russia, impacting the industry.

Japan halts profitable used-car trade with Russia, impacting the industry.

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Japan halts profitable used-car trade with Russia, impacting the industry.

The recent decision by Japan to restrict the sale of used cars to Russia has halted a flourishing trade worth almost $2 billion annually. Japan’s government banned the export of all but subcompact cars to Russia in an attempt to comply with sanctions imposed due to the conflict in Ukraine. This move has not only eliminated Russia’s primary source of used cars but has also caused a decline in prices for second-hand cars in Japan. Consequently, brokers are attempting to redirect vehicles to other markets, particularly right-hand drive markets in New Zealand, Southeast Asia, and Africa. This abrupt halt in the trade has had a significant impact on businesses involved in the export of used cars to Russia, leading to downsizing and decreased opportunities for employment.

Russia’s demand for second-hand cars from Japan soared when global automakers, including Toyota, reduced their operations following Russia’s invasion of Ukraine. In 2020, Russia accounted for approximately 15% of Japan’s used-car exports, but by last year, this had risen to over a quarter, with an average price of nearly $8,200. The trade was projected to exceed $1.9 billion by 2023 before Japan imposed stricter sanctions. More than half of Russia’s imported used cars in the first eight months of the year were from Japan. However, these figures pale in comparison to the sales of new cars, which primarily consisted of Russian and Chinese brands.

The impact of the ban has been far-reaching, with businesses like SV Alliance facing a decline of around 70% in their operations and having to lay off employees. Japan has long been a major exporter of used cars, with its mandatory inspection system driving up maintenance costs domestically but making exporting profitable. While some businesses have benefited from the drop in used-car prices, such as the battery recycling firm 4R Energy, which can secure supplies like the Nissan Leaf at a lower cost, overall, the ban has caused a major disruption in the industry. The Japanese government is closely watching the effects of the sanctions, but for now, the future of the once-thriving trade remains uncertain.

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