Georgia is a small country in South Caucasus region. Today it has become a major center of the international used car market, whose value reaches billions of dollars. Most of the cars come from the US and many of those cars end up going to Russia.
A huge second-hand car market has developed in the open spaces of the industrial city of Rustavi, 20 kilometers from Tbilisi, the capital of Georgia. Thousands of cars are sold in this space, which is the size of 40 football fields. Cars from Mercedes, Porsche, Jaguar, Toyota and recently Tesla are also sold here.
One of the largest car trading companies is Caucasus Auto Import (CAI). This company buys used cars from various auctions in the United States. Many of these cars have been so damaged in accidents that they have been written off by American insurance companies.
CAI said its 'team of experts' went to the US to directly select the cars and then they were transported 10,000 kilometers by container ship to the Black Sea coast of Georgia. After arriving in Georgia, local mechanics repaired the cars.
David Gulashvili, CAI's deputy chief executive, said, "Our organization has made a significant contribution to modernizing Georgia's vehicle fleet." Before starting their business in 2004, Georgia mainly sold Soviet-era Lada and Vaz brand cars. At present CAI with 600 employees is working to meet the demand of western cars in Georgia.
Georgia imported $3.1 billion worth of cars last year, according to government statistics. Then, the country exported $2.1 billion worth of cars, mainly to former Soviet republics in the Caucasus and Central Asia. Cars are Georgia's second largest export product after mineral copper.
Every car in Rustavi's huge car market has a card inside the windscreen, indicating the car's price, engine size and date of manufacture.
"We have been re-exporting cars from Georgia for about 3.5 years," said Alisher Tezikbaev from Kazakhstan. We ship cars and arrange auto tours to Kazakhstan. Clients come to Georgia to pick up their own cars.
Georgia used to export secondhand US and European cars to its northern neighbor Russia. But it was officially closed in 2022 after the Russian invasion of Ukraine.
In September 2023, Georgia's Revenue Service announced that the re-export and transit of imported US or European cars to Russia and Belarus was restricted in the wake of Western sanctions.
Georgian officials have long denied the country is helping Russia violate trade sanctions. But a recent investigation by Georgian media publication Effecti found that an army of car dealers on both sides of the Russia-Georgia border are exploiting various loopholes.
David Gulashvili said, my company does not do any business with Russia now. From the first day of the war we have restricted any trade or exportation with Russia. You won't find a single car for export to Russia through Caucasus Auto Import. There is no existing mechanism to monitor the final destination of vehicles for re-export to other countries.
Exports of secondhand cars to Kazakhstan, Kyrgyzstan and Armenia have increased dramatically following Russia's attack on Ukraine. The countries are members of the Russian-led Customs Union. As a result, cars registered in those countries can be driven into Russia with very low tariffs.
According to the National Statistics Agency of Georgia, Georgia exported 7,352 used cars to Kazakhstan in 2022. In 2023, this number has increased more than five times to 39 thousand 896.
While various geopolitical maneuvers are underway, the success of Georgia's secondhand car industry can be attributed to its geographic location. It has access to Europe via Black Sea ports and to Central Asia via Baku on the Caspian coast of neighboring Azerbaijan. Besides, cheap labor cost is an important factor in repairing salvaged cars.
David Gulashvili said it is not economically viable to rebuild these damaged cars in America. This is because service costs, including human resource costs, are high and legal costs to get these vehicles back on the road are time-consuming and very expensive.
He said rebuilding a car in the U.S. and getting it legalized again takes six months and costs roughly $5,000. But in Georgia it takes 1 thousand dollars and a month to repair the same car.
While most cars imported into Georgia run on gasoline and diesel, Zaja Andriashvili, who has been repairing car engines for nearly three decades, says demand for electric and especially hybrid cars is growing.
Andriashvili said, currently about 30 percent of the cars we are bringing are hybrids. While it's not fully electric, it's a hybrid like the Toyota Prius. The growth rate of this demand is extraordinary, which is 300 to 400 percent per quarter.
"Tesla's largest resale market is Ukraine, where I have 100 employees," said David Gulashvili, CAI's deputy chief executive. It is very expensive and risky. But we are trying to make an impact there. We are also importing a lot of pickup trucks to Ukraine, which are being used in the fight against Russia.
Source: BBC.
