Japan’s recent decision to restrict most used-car sales to Russia has had a significant impact on a trade that was approaching an annual value of $2 billion, as per trade data and industry insiders.
This trade had flourished in the midst of ongoing sanctions related to the conflict in Ukraine.
In early August, the Japanese government imposed a ban on the export of all but subcompact cars to Russia.
This move abruptly cut off a lucrative trade route for used Toyota, Honda, and Nissan vehicles, managed by a network of brokers and smaller ports, particularly the export hub of Fushiki on the Sea of Japan.
The sanctions not only eliminated Russia’s primary source of used cars but also drove down prices for second-hand vehicles in Japan.
Brokers were left in a scramble to redirect vehicles to other markets, with a particular focus on right-hand drive markets in New Zealand, Southeast Asia, and Africa.
Russia’s demand for second-hand Japanese cars had surged following the withdrawal of global automakers, including Toyota, from the Russian market due to the Ukraine conflict.
By last year, Russia was purchasing more than a quarter of Japan’s used-car exports, with an average price of nearly $8,200 per vehicle, more than double the 2020 price when Russia accounted for about 15% of these exports.
Trade data indicated that these sales were on track to exceed $1.9 billion for the entirety of 2023 before Japan imposed stricter sanctions.
In the first eight months of the year, over half of the 303,000 used cars imported by Russia came from Japan, while the data from Russian analytical agency Autostat showed that Russia purchased 606,950 new cars, primarily from Russian and Chinese brands, during the same period.
SV Alliance, a two-year-old car export business based in Toyama, had been a part of the boom in used-car exports to Russia.
However, the company experienced a 70% decrease in business and had to lay off employees due to reduced demand.
Japan has long been a leading exporter of used cars, with mandatory inspections increasing the maintenance costs of used vehicles for domestic customers.
This has resulted in a thriving export industry that has sent hundreds of thousands of Japanese cars to various destinations.
Japan’s Ministry of Economy, Trade and Industry is closely monitoring the impact of the new sanctions.
The recent sanctions built upon an earlier ban on exporting luxury vehicles to Russia in April of the previous year and the prohibition of heavy truck exports in June.
Despite these restrictions, dealers can still export smaller vehicles like the Toyota Yaris or Honda Fit to Russia.
However, many businesses have seen their share of the Russian market decrease, prompting them to explore new opportunities in other markets.
This has led to an increase in the number of used cars available and a 7% drop in average vehicle selling prices.
While this price decline has been challenging for some, it has benefited others.
Battery recycling firm 4R Energy, including the Nissan Leaf, reported a “significant” tailwind from declining used-car prices, enabling them to secure supplies more effectively.