Between sessions, the cafeteria of the Mirive auction house emits a hum of haggling. In the air, and in many languages, talk of raw material chaos, shipping tariffs, semiconductor supply chains, China’s industrial strategy, the price spike of a washing machine professional self and, since the invasion of Ukraine, of war.
The auction’s setting, deep in rural Saitama, is rural; the economy at play as thousands of vehicles change hands within hours couldn’t be more global.
In the carefully balanced – and historically lucrative – trade of shipping used Japanese cars to emerging markets, “every factor has an impact,” says a buyer with customers across sub-Saharan Africa.
Tiny shifts in mood and prices at auctions like Mirive in suburban Tokyo and Osaka trace economic trends in Lesotho, Jamaica and the United Arab Emirates, as well as dozens of other markets which, over the decades have become accustomed to a steady stream of high-quality, undamaged Japanese cars. Japan‘s used-car exports, said Sanshiro Fukao, a senior researcher at the Itochu Research Institute, should be seen as the thermometer of the global economy.
Since late February, the sharp slowdown in shipments to Russia and, with it, the evaporation of Japan’s biggest source of demand for used cars has had everyone tearing up old math.
The critical figure weighing on the used car market in Japan is the monthly average price set by the country’s largest auction manager, Used Car System Solutions (USS). For the first time since comparable records began more than 20 years ago, the average price in February passed the $1 million mark ($8,500) – a milestone that still seemed distant a year ago. , while the average was 20% lower. But how long will it last?
According to dealers, the Y1mn figure is locked not only in the post-Covid/pre-Ukraine strength of global demand in February, but also in the closely linked relationship between the new and used markets in Japan. These markets are very important to Toyota, Nissan and other Japanese automakers. Historically, when used auction prices rise, dealerships are better able to entice Japanese customers with higher trade-in prices and, therefore, push more new cars off the forecourt.
Similar to other developed markets, pandemic-related semiconductor shortages have simultaneously reduced the supply of new Japanese cars, extending wait times and prompting more domestic buyers to turn to the market. of the occasion. This, combined with a multi-year weakness in the yen which boosted global demand for used Japanese cars, produced a push towards the Y1mn average.
For many years, a central pillar of the Japanese used car export market has been Russia. But the main port of entry, Vladivostok, has changed. As the pandemic hit multiple supply chains, priority was given to the arrivals of Chinese and South Korean container ships with cargo deemed more important to the wider Russian economy. At the same time, Chinese automakers have tried to reserve more and more dock space to push their new vehicles into the Russian market.
Yet even with those headwinds, Fukao said, of the total 1.2 million used Japanese cars exported last year, 160,000 went to Russia. The United Arab Emirates, whose total includes much of it subsequently shipped to Africa, was second with 130,000. But, as many Mirive auction dealers confirmed, the day after the invasion of Ukraine by Russia, virtually all shipments to Russia appear to have been suspended, insurance premiums have increased and several key freight routes have been abruptly changed.
Auction traders say the sudden absence of Russian demand should take the average to its Y1mn high in relatively quick order. Even further decline in the yen and expectations of increased demand from New Zealand and Southeast Asia are unlikely to fully offset the decline.
But that ignores Russia-related factors affecting prices in Japan’s new car market: rising electricity and raw material costs that are acutely affecting automakers and parts makers , or their sudden need to find other sources of materials such as aluminum that would normally come from Russia. . The spectacle of rising new car prices, dealers said, could easily prolong the phase in which Japanese buyers have been drawn to used models.
“It’s always Russia — it’s in or out of the calculation. Or both,” said a Pakistani trader, betting that overall the Y1mn average will hold.