ARKANSAS, Oct 2 (Future Headlines)- Japan’s recent decision to restrict the export of used cars to Russia has had significant repercussions on a trade that was flourishing, with annual revenues nearing $2 billion. This move, stemming from geopolitical tensions, has disrupted not only Russia’s access to used Japanese vehicles but also the global used car market, impacting prices and trade dynamics.

In early August, Japan’s government implemented a ban on the export of most used cars to Russia. The ban only permits the export of subcompact cars, effectively shutting down a thriving trade in used Toyotas, Hondas, Nissans, and other Japanese brands. This trade had established a network of brokers and smaller ports, with Fushiki, an export hub on the Sea of Japan, being a crucial player.

The ban has had a profound impact on Russia’s used car market. Prior to the ban, Russia was purchasing more than a quarter of Japan’s used car exports, at an average price of nearly $8,200 per vehicle. This was a substantial increase from 2020 when Russia accounted for approximately 15% of Japan’s used car exports. The ban has effectively eliminated Russia’s access to its largest source of used cars.

The ban has also affected the Japanese used car market. Prices for second-hand cars in Japan have seen a notable decline, and brokers who depended on the Russian market are now struggling to find alternative destinations for their vehicles. This has led to decreased business activity and job losses in the sector.

With Russia out of the equation, Japanese brokers are racing to redirect their used cars to other markets, including New Zealand, Southeast Asia, and Africa. These regions, particularly those with a preference for right-hand drive vehicles, have become more attractive destinations for Japanese used cars.

Japan has been a prominent player in the used car export industry for decades. The country’s system of mandatory inspections results in higher maintenance costs for used cars, incentivizing owners to sell their vehicles relatively early. This creates a surplus of well-maintained used cars, many of which are exported to countries across the globe, driving Japan’s used car export industry.

Takanori Kikuchi, a director for automotive trade policy at Japan’s Ministry of Economy, Trade, and Industry, stated that the government is closely monitoring the impact of the sanctions on the used car export industry. Japan had already banned the export of luxury vehicles to Russia in April 2022, followed by a prohibition on heavy truck exports in June.

Dealers are still permitted to export smaller cars like the Toyota Yaris and Honda Fit to Russia. However, many businesses have seen a significant decline in their Russian market share, leading to an oversupply of used cars domestically. This has caused a drop in average vehicle selling prices, which has been both beneficial and challenging for various stakeholders.

The reduction in used car prices has benefited companies involved in battery recycling, such as 4R Energy. Lower prices for vehicles like the Nissan Leaf have provided opportunities for recycling firms to secure a wider supply of used batteries. This is particularly advantageous for companies like 4R Energy, a joint venture between Nissan and Sumitomo, which focuses on battery recycling.

Japan’s ban on used car exports to Russia has sent shockwaves through the used car trade, impacting businesses, pricing dynamics, and trade routes. It has also highlighted the geopolitical nature of the global used car market and the interconnectedness of industries and regions in the face of international tensions. The repercussions of this ban will likely continue to evolve as businesses adapt to new market conditions and geopolitical dynamics.

Writing by Alireza Sabet; Editing by Sarah White