Used Japanese cars go to Russia

Japan’s used-car exports to Russia’s far fast have substantially increased since around May.

That’s despite Japan and many western nations having imposed economic sanctions against Moscow following its invasion of Ukraine.

However, some Russian companies say they are being flooded with orders from across the country.

A representative at a logistics company says it uses two cargo ships to transport 2,000 used cars from Japan each month. But the company is unable to increase its capacity because the level of freight services is limited.

Dmitriy Zabora, chief executive officer of used-vehicle importer Carwin, which is based in Vladivostok, is baffled by the situation. Vladivostok, pictured, is the largest Russian port on the Pacific Ocean.

His company had to temporarily stop accepting orders earlier this year because prospects were uncertain after the invasion of Ukraine started in February.

Then, around April, Carwin’s orders ramped up shortly after it resumed importing. It received about 300 orders in June, more than three times from before the conflict when the figure was 60-90 per month.

The company had to limit orders to about 200 because it couldn’t keep up with the workload. According to Zabora, by August 17,000 to 18,000 used cars were being transported to Russia from Japan monthly.

However, the increase in orders caused delays in making arrangements for cargo ships and storage facilities, as well as customs procedures, so about 40,000 to 45,000 purchased units were waiting for loading in Japan just a few months ago.

Japanese shipping companies stopped their services from Yokohama and Kobe to Russia’s far east after the invasion due to economic sanctions.

The situation was aggravated after a Russian cargo ship loaded with used cars caught fire while it was en-route to Vladivostok from Fushiki port in the Toyama prefecture in late June, resulting in its temporary suspension. 

Japanese used cars becoming cheaper thanks to the strong rouble was a reason for the rise in orders. Prior to the war, one rouble was worth around 1.5 yen – or about NZ$0.018. It was worth less than 0.9 yen‎‎ at one point after the invasion. However, the Russian currency rebounded post-late April, hovering at around 2.5 against the yen at one time. 

For example, a used car worth three million yen in Japan, or around NZ$35,000, was worth about two million roubles – some NZ$23,350 – before the invasion. But its value soared to about 3.33m roubles after the invasion, before dropping to about 1.2 roubles. One rouble was hovering around 2.3 against the yen on November 17.

The higher the car price, the more benefits the buyer can gain from a stronger Russian currency. BMWs and other luxury European cars are popular in the pariah state.

There were also views back in August that falling prices of imported cars were contributing to dwindling sales of new vehicles in Russia, although such production there has now decreased any way.

Economic sanctions against Russia include an export ban on luxury cars worth more than six million yen, which converts to about NZ$70,000, medium and large trucks, and other vehicles.

Following Russia’s invasion on February 24, many foreign companies exited Russia, and stopped exports and imports relating to the country after severe sanctions were imposed.

With Russia’s economy isolated from the rest of the world, its prospects appeared bleak and the rouble temporarily nosedived. But while there was a sharp decline in imports, its exports of oil, natural gas and other resources, which are its main source of foreign-currency revenue, haven’t been dealt a severe blow thanks to high resource prices.

This triggered sharp declines in buying US dollars and euros to pay for imports. As a result, the level of roubles to be bought by selling foreign currencies obtained through exports increases, allowing the rouble’s exchange rate to rise.

On the flipside, global vehicle production continues to be unstable because of the semi-conductor shortage and other factors, resulting in a growing demand for used cars.

The Asahi Shimbun, a daily newspaper in Japan, reported on August 3: “It’s possible exports to Russia will peak due to the used-car supply shortage in Japan and elsewhere.”