Japan puts the brakes on lucrative used-car trade with Russia. According to trade statistics and market players, Japan’s decision to prohibit most used-car sales to Russia put the brakes on a $2 billion-per-year industry that had expanded in the shadow of other countries’ sanctions related to Ukraine.

A network of brokers and smaller ports, particularly Fushiki, an export hub on the Sea of Japan, lost their profitable backchannel in trading in old Toyotas, Hondas, and Nissans when the Japanese government prohibited the export of all except subcompact automobiles to Russia in the early days of August.

The restrictions have reduced used car prices in Japan while eliminating Russia’s main supplier of used automobiles. Brokers are now trying to ship autos to other countries, particularly right-hand drive markets in New Zealand, Southeast Asia, and Africa.

Following the withdrawal of major automakers from operations in the wake of Moscow’s invasion of Ukraine, particularly Toyota, demand for used vehicles from Japan in Russia increased significantly.

By the end of the previous year, Russia was purchasing more than 25% of Japan’s exports of old cars at an average cost of close to $8,200 while other countries tightened their sanctions. That was more than twice as expensive in 2020, when nearly 15% of Japan’s exports of secondhand cars went to Russia. According to trade statistics, before Japan enacted its own stricter penalties, the sales were on course to surpass $1.9 billion for 2023.

According to data from the Russian analytical organization Autostat, over half of the 303,000 used automobiles Russia imported in the first eight months of the year originated from Japan. According to Autostat data, 606,950 new automobiles were sold over the same period, mostly from Russian and Chinese companies.

SV Alliance, a two-year-old automobile export company established in Toyama, participated in the post-war boom that saw Fushiki, a Japanese automaker, ship an average of 6,500 used cars to Russia monthly through July. Vladivostok, Russia, is around 800 kilometers (500 miles) from the port; a cargo ship may reach there in two days of sailing.

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

RECYCLERS NEED CHEAPER CARS

For many years, Japan has been a top exporter of secondhand vehicles. Customers in Japan pay more for used automobile maintenance due to a system of required inspections. By comparison, financing charges for new automobile purchases are modest.

The result is an export sector that has put hundreds of thousands of automobiles originally purchased in Japan on the road in Malaysia, Mongolia, Pakistan, and Tanzania. The Japanese Ministry of Economy, Trade, and Industry’s Takanori Kikuchi, director for automotive trade strategy, said the administration was “watching to see what kind of impact” the new penalties will have.

In April of last year, Japan first forbade the shipment of high-end automobiles to Russia. In June, it banned the export of large trucks. Dealers may still sell more compact vehicles, like the Toyota Yaris or the Honda Fit, to Russia despite the new sanctions. According to Wataru Nishiwaki, chief executive of Element Trading, a used automobile dealer in the Niigata prefecture that borders Toyama, the proportion of Russian customers has dropped from a high of over 50% to under 20%.

Preliminary statistics from auto auction firm USS revealed that the number of used automobiles available increased by more than 20% in August compared to last year, while average vehicle selling prices decreased by 7%.

Some people cheered the price drop. According to CEO Yutaka Horie, the Nissan Leaf’s price decline and other factors have given the battery recycling company 4R Energy a “significant” boost.

According to him, lower costs provide the Nissan and trading company Sumitomo joint venture more opportunities to source suppliers.