Japanese used vehicle export industry is a grey market international business involving the export of used cars, trucks, buses, motorbikes, auto spare parts and other vehicles including used construction machinery from Japan to other countries around the globe. This has become a huge business for exporters of the used Japanese cars over the past few decades. These exporters are generally the people and companies based in Japan who are of Japanese, Pakistani, Bengladeshi, Indian, Sri Lankan origin.
Why Export Business Is Still Profitable
Despite the high cost of transport, the sale of used cars and other vehicles to various countries is still profitable for the exporters in Japan as well as the importers of these vehicles spread all over the world. Some of the factors behind this profitability are as follows.
- Relatively great condition of the vehicles being purchased as many Japanese people do not drive much but like to keep their car and other belongings in perfect shape and color etc.
- Low mileage of the vehicles exported as Japan is a small island country and people do not drive as often as their counterparts in other advanced countries
- Japan’s strict motor-vehicle inspections, environmental-protection regulations and high depreciation make such vehicles worth very little in the country
- It becomes very expensive for Japanese people to dispose older cars due to high maintenance costs, stringent vehicle emission test standards, exorbitantly high mandatory inspection charges on periodic basis
Cars are typically scrapped or exported for sale abroad by the time they are about 10 years old on average basis. Engines removed from scrapped vehicles along with other car parts are exported for sale outside Japan on container basis.
Nearly 1.4 million used vehicles were exported from Japan to other import markets in 2006. The most popular destinations for used cars from Japan are Bangladesh, Russia, Mongolia, Kazakhstan, Trinidad and Tobago, New Zealand, Tanzania, Zambia, Zimbabwe, Malaysia, Australia, Congo, Ireland, Pakistan, Georgia, Dominican Republic, Peru, Bolivia, Paraguay, Kenya, the United Kingdom, Thailand, Myanmar and the Philippines. Additionally, Chile, Singapore, South Africa and the United Arab Emirates are used as popular transit hubs from which Japanese cars and other vehicles are re-exported to other neighboring countries.
Supply of Used Cars
In Japan, used cars are mainly sold at auto auctions by car owners and dealers. At these auto auctions, owners are hidden from bidders while the auctioneers as mediators and facilitators between the two sides provide independent car evaluations in te form of inspection sheets. Exporters, acting as bidding agents for importers from around the world, use the auto auctions as their main supplyline for purchasing cars for export purposes. There are over 200 auto auction groups operating throughout Japan including JAA, JU Group, TAA, USS, HAA, CAA and ZIP etc.
Besides auto auctions, Japanese exporters in the country also have access to vehicles from dealerships and private sellers who are located in all parts of the country.
Vehicle Export Documents
Vehicles which are to be exported from Japan must be prepared before shipping. Following is a list of the documents needed to make the shipping arrangements properly.
- De-registering the vehicle with the local car registration office located in all parts of the country
- Getting an export certificate
- Cleaning the car to remove biosecurity risks. (Car cleaning is especially necessary for the Australian Quarantine and Inspection Service (AQIS) and New Zealand’s Ministry of Agriculture and Forestry (MAF) agencies’ clearances)
There are mainly two methods by using which used car exporters can ship their cars. They are as follows.
- Shipping by ro-ro: In this method, cars are parked in the open space provided by the ships destined for various countries
- Shipping by container: The method requires cars to be packed in containers of either 20 ft. or 40ft. sizes. The method to pack cars in a container is called Vanning
Used car exporters employ either of the above mentioned shipping method to export cars depending on their customer requests, shipping schedules and capabilities of the destination ports in question. Generally speaking, the ro-ro shipping method is considered cheaper.
The suitability of Japan’s domestically sold cars for export to other countries is constrained by various factors. Vehicles in Japan have right-hand drive—the driver’s seat is on the right side of the vehicle—in accordance with Japan’s left-hand traffic. Some countries with right-hand traffic allow right-hand drive vehicles, though right-traffic headlamps are generally unavailable for models exclusive to the Japanese market. Some countries with right traffic do not allow right-hand drive cars, but in some of these markets the extensive labor required to convert a car to left-hand drive is economically feasible; such conversions are sometimes done by the staff at the local importers.
The Philippines is an example of a market where such conversion is common, until recently, when the importation of such used vehicles (except for heavy vehicles) was banned. Japan’s automobile safety regulations also differ substantially from the ECE Regulations used throughout most of the world and the U.S. and Canada.
Vehicle components such as windows and windshields, seat belts, lamps and reflectors, and mirrors, as well as design features for crashworthiness such as bumpers, fuel tanks, and structural rigidity of vehicles meant for the Japanese market may not comply with non-Japanese standards. They often lack structural reinforcements needed to meet side-impact crashworthiness standards in effect outside Japan. Moreover, entire categories of vehicle, such as do not exist in regulations outside Japan.
Generally, most exporters are responsible for the organization and completion of the vehicle’s transportation until it arrives at the importer’s Port of Destination (POD). At the POD, possession of the vehicle, and the responsibility of possession, is laid on the importer. Financial responsibility, on the other hand, is transferred when ownership is handed over. Ownership is switched after the car has been purchased and before being shipped. In the case of damage or losses occurring during shipping, the buyer is the one who bears all financial loss.