Car Re-export Biz Slowly Dying, While Unemployment is Growing
02 October, 2014
Car Re-export Biz Slowly Dying, While Unemployment is Growing
From the 1st of September, the customs duty was lifted on cars imported from the EU, in accordance with the Association Agreement and Deep and Comprehensive Free Trade Agreement. Thus, an importer of cars from the EU will be able to save 150-300 GEL per car. Due to the fact that most of the price of customs clearance is covered by excise tax rather than customs duty, importers think that lifting such a meager tax will not have any noticeable
effect on the car business, which is in a dire condition at the moment. In order for an importer to be exempted from customs duty, he has to hold a certificate for every single car brought through the border that proves its location of origin.

It has been six months since the ban on exporting cars manufactured before 2005 from Georgia to Azerbaijan, which put this sector in a very unpleasant situation. The largest percentage of cars re-exported from Georgia went to its eastern neighbor. A few months ago, “Kviris Palitra” predicted that the re-export of cars to Armenia would cease as well, when it becomes a member of the Eurasian Customs Union. In 2011, this was precisely the reason why the Kazakh market was closed to Georgia. Just two years before that, in 2009, more than 20 thousand cars were exported to Kazakhstan from here. Due to the fact that Armenia’s membership in the Eurasian Union became delayed for an indefinite term, exporters of used cars set their hopes on this market, but only a small share of them goes through. Cars sent to Armenia represent only 26 percent of Georgian car re-export. Importers left without an outlet for their goods are spending time dealing with resulting financial problems and asking for help from the government.
TEMUR BAGHDADASHVILI, car importer: “I’ve been in this business for 15 years and yet I can’t remember a time when conditions for us were as bad as they are now. Each weekend, only an average of ten cars gets sold. More expensive cars are having an even harder time when it comes to sales, and we are forced to cut down their prices severely. For example, a car that used to cost from $15,000 to $20,000, now can be sold for $11,000 – far cheaper than it cost the importer to obtain the car and bring it here. The closing of the Azerbaijani car market for us was a heavy hit on our sales, but the government isn’t doing anything to give us a chance to overcome this crisis, even though 25 to 30 thousand Georgians are involved in this business and its total turnover is about a billion dollars.
Due to us no longer being able to sell cars, all importers have exceeded the 45-day customs clearance deadline and now have to pay fines ranging from 300 to 1,000 GEL. Not so long ago we could barely register a car at a terminal before it got sold. Now I stand at the market without a single customer in sight, and it’s been like this since the 9th of May. Importing a car cost me $1,300 and I now have to pay $500 more for both exceeding the clearance deadline and standing around at the market. Even if I manage to sell this car, I am bound to lose at least $3,000, and this is only in case I get lucky and find a customer soon. Otherwise, I might lose even more money.
Everyone involved in this business has gone bankrupt. I simply have to sell this car in 45 days so that I won’t have to pay the customs tax. Yet I can’t sell it, so I am forced to reduce its price to avoid sanctions. People are seeking investors abroad and give local investors no attention… Just give us an opportunity to do our thing, damn it. The only ones lining their pockets with gold here are the market’s owners. When our business develops and takes on a more civilized shape, it would be possible to sell cars by installment, without banks. And our relationship with banks will become far simpler. In such conditions, our car park will become fluid and slowly renewed instead of just sitting here like an inert pile of junk.”
IAGO NATSVLISHVILI, car importer: “Due to a decrease in our sales, a lot of car export outlets in Europe became closed. What still gets sent here is of low quality and extremely cheap, to be sold in Armenia at a giveaway price.
Long story short, we’ve been limited in every possible way – the government is fleecing us with their obligatory customs clearance, keeping cars at the market and terminals for months is becoming expensive… If you noticed, the amount of cars parked in the streets with “For sale” notes on their windshields has increased. Our local customers, due to their limited purchasing ability, have mainly switched to right-hand drive cars from Japan and the US, which cost from $2,000 to $3,000. Driving such a car in our streets isn’t safe, but our customers feel that cheapness compensates for this.
Thus, the import of used cars from Europe is slowly dying, while our unemployment lines are quickly growing.”

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