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Eurasianet

Eurasianet

Eurasianet is an independent news organization that covers news from and about the South Caucasus and Central Asia, providing on-the-ground reporting and critical perspectives on…

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Georgia's Car Re-Export Trade Faces Uncertain Future

  • Georgia's re-export of cars to Russia and Belarus has declined due to Western sanctions, leading auto dealers to explore new markets in Central Asia.
  • The transition to new markets has seen some success, but the future of Georgia's used-car industry remains uncertain amidst competition from China and regulatory changes.
  • Industry experts and dealers express concern about the impact of lost markets and restrictions on the livelihoods of many employed in the car trade.
Used Cars

It’s a Monday afternoon at Georgia’s Rustavi auto market, and business is slow. 

Dealers wind their way among rows of imported European BMWs and Japanese Subarus, negotiating with potential customers on the phone while sipping coffee from nearby cafes. There are cars – endless rows of them – that need to be sold. The only problem is that there are barely any buyers. 

Gela Khachidze, 53, has been working in the market for about 10 years. In an interview in March, he said that business was the worst he’d ever seen. “It’s never been like this before,” he said. “It wasn’t even like this during the pandemic.” 

Georgia’s re-export of cars – the country’s single biggest export commodity – is in the midst of a transition. In summer of 2023, the Georgian government, citing a desire to enforce Western sanctions, made it more difficult to re-export autos to Russia and Belarus. That move accelerated efforts by Georgian auto dealers to open and expand into different markets, including Central Asia. 

Those efforts have paid some dividends. For example, official customs records in Kazakhstan for 2023 show that Georgia shipped the second-highest number of autos to the Central Asian state of any foreign exporter. China was the top auto exporter to Kazakhstan: most of the Chinese vehicles going to Kazakhstan were new, while those coming from Georgia were second-hand.

Total revenue generated by Georgian auto re-exports has risen for the past three years, topping $940 million in 2023. Data for January through April ($577 million in revenue) puts the country on pace to break 2023’s total. It appears that for now at least, the pivot to Central Asia will continue to produce profits.

But for many Georgian used-car merchants, the future is uncertain. 

“Today Georgia functions as a motor hub in the region, but the future has both problems and prospects,” said Aleksandre Noniadze, head of the Georgian Association of Auto Importers. The biggest challenge, Noniadze adds, is for Georgia to retain its market position as a major exporter of used American and European cars. 

“If Chinese automakers fully develop the market in Central Asia and the Caucasus region, Georgia may lose its function as a hub,” he said. 

For years, Rustavi has been the biggest auto market in the Caucasus. Wrecked cars from the West are often bought at a sizable discount and then shipped to Georgian ports. Once mechanics work their wonders, they wind up here and in other venues, ready to be sold for a sizable profit. 

Recent years have seen compounding challenges. First there was the Covid epidemic, then Russia invaded Ukraine. At that time, Armenia and Azerbaijan were some of the biggest auto export destinations, and Ukrainians comprised a sizable group of buyers. Now, on the paved show lots of Rustavi, Ukrainians are nowhere to be found, and Western cars no longer go to Russia in the huge quantities they once did. 

“It’s very hard because we lost Ukraine,” said Lasha Darbaiseli, who also works for the Georgian Association of Auto Importers. 

Buyers from Kazakhstan and Kyrgyzstan now make up the majority of customers at the auto market. In January, Kyrgyzstan became the top overall destination for Georgian exports, in terms of total value of commerce, helped in no small part by the used auto trade. 

In early 2024, Georgian investigative outlet iFact published evidence that the flow of Western cars from Georgia to Russia continues despite the ban. Industry experts acknowledge that Russians are likely just importing cars via Central Asian countries now, making the process of getting Western automobiles harder and more expensive but not impossible.

There’s no data on how many people work in Georgia’s car industry, but it doesn’t just consist of dealers. It employs mechanics, logistics experts, and office managers, many of whom are also upset with a government mandate that took effect this year under which cars assembled before 2013 can’t be imported for domestic use due to concerns over auto emissions standards.

“Many will not be able to buy a new car, which will further increase the already old vehicle fleet,” said Noniadze, adding that prices for cars made after 2013 are going up. 

For the average dealer who works on commission, the changes are challenging. Back at the Rustavi auto bazaar, Khachidze lamented the lost business. He estimated that before the pandemic, he used to sell 15-30 cars per week. Before Russia’s invasion, that number fell to 10 per week. Now, he’s lucky to sell half that many over the same timeframe. 

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To make his point, he waved his hands over the green frame of a Mercedes Benz S 500. “This car has already been here for over a year. How do you sell it? Why bring a second one?” 

When asked if there’s anything people should know about the state of the re-export sector in Georgia, he pointed to the fallout from the government’s restrictions, and Western sanctions.  

“These bans – sanctions – don’t attack Russia, they directly attack Georgia,” he said, noting the large number of people that the country’s car trade employs. “Everyone was making money with this [industry]. Now everyone has been let go from this business because there are no customers.”

By Brawley Benson via Eurasianet.org

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