How do car dealers find new markets?

The Tianya International Automobile Center in Moscow, Russia's capital, the largest Chinese automobile city in Russia, opened at the end of last year. At that time, Chinese cars were selling well in Russia, but now the market situation is becoming more difficult and complicated.

Since the outbreak of the Russian-Ukrainian conflict, European and American automakers originally in Russia have withdrawn one after another, and Chinese auto brands have filled the market gap, rapidly developing to a market share of more than 60% in just two years.

The sudden increase in demand has made the Russian market a hot spot for the export of Chinese auto brands, and has also brought the parallel export business to the public's attention. Parallel export refers to a trade form in which car dealers purchase cars from China and register them, and then sell them abroad as used cars.

An Ideal L9 is priced at about 400,000 yuan in China, but when it is parallel exported to Russia or other Central Asian countries, the terminal price can double. But now, taking Ideal models as an example, the local terminal prices of L6 and L9 are about 420,000 yuan and 660,000 yuan respectively, which has dropped a lot compared to the doubled prices after parallel export. For car dealers, a car has been passed on several times and the price has been increased layer by layer, so the profit for each person will only be lower.

As the market changes, policies are also tightening. Russia has implemented two new policies on automobile imports around this year, which directly increased the cost of exporting cars from China to Russia. In addition, OEMs have also begun to intentionally prohibit parallel exports.

In the past two years, China has exported vehicles to Russia in the name of parallel exports and second-hand car exports, mostly through the ports of Xinjiang and Heilongjiang to Central Asia and Russia. Since the EAEU countries (Eurasian Economic Union) represented by Kyrgyzstan have the advantage of low customs clearance tariffs when exporting to Russia, a large number of car dealers choose to transport vehicles to Central Asian countries for transit and then to Russia. These vehicles can avoid high taxes and fees to earn more profits.

Starting from April 1 this year, Russia began to implement a new policy for automobile imports. This policy means that parallel exports or second-hand car exports from China to Russia through Central Asian countries need to pay various taxes and fees, and will no longer have the original low customs clearance cost advantage.

At present, the new energy brands that are parallel exported and sold in Russia are mainly Ideal and Zeekr, while the fuel brands are mainly Chery and Geely. Although Ideal Auto is well known for its hot sales in Russia, the main force of parallel exports is still fuel vehicles. Coupled with the local natural environment, Russian consumers have not yet fully accepted new energy vehicles.

In fact, the sales share of Chinese cars in the Middle East began to increase after the epidemic, mainly consisting of Chinese brands and joint venture brand models produced in China. In the past two years, many domestic automakers have begun to set their sights on this market in West Asia and North Africa, and the same is true for parallel exporters. It is understood that the current parallel export models to the Middle East market are also mainly fuel models.

The situation in Africa, another major market, is slightly different. In the past, Africa's automobile consumption has always relied on imports. At present, many African governments have introduced policies to support the development of electric vehicles, such as reducing or canceling import tariffs on electric vehicles. Ethiopia also announced a policy to ban the import of fuel vehicles at the beginning of this year, which provided favorable conditions for the export of Chinese electric vehicles to Africa.