Horgos Becomes China's Largest Overland Export Port for Autos (AI Translation)
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文｜财新周刊 安丽敏
By Caixin Weekly's An Limin
4月5日，在新疆霍尔果斯口岸，等待出关的“零公里二手车”少了很多。“早期只要把车开到几十公里外的一个哈萨克斯坦小镇，司机跑一趟就能赚到2000多元；现在送一趟车，价格降到了500元。”站在海关通道前，当地一名从业几十年的“老外贸”感叹，汽车平行出口生意今不如昔。
On April 5th, at the Horgos Port in Xinjiang, there were noticeably fewer "zero kilometer second-hand cars" waiting to clear customs. "In the early days, drivers could earn over 2,000 yuan just by driving the cars to a small Kazakh town a few dozen kilometers away; now, the price for delivering a car has dropped to 500 yuan," lamented a veteran local foreign trader standing in front of the customs passage, reflecting on how the business of parallel car exports isn't what it used to be.
“汽车平行出口”是指贸易商在国内购买新车，再以二手车名义销售到其他国家。以这种方式出口的汽车也称“零公里二手车”。平行进出口贸易较多出现在汽车价格差异较大的市场之间。比如此前一些贸易商在中国销售平行进口汽车，这些车型往往在国内比较紧俏或者可以加价销售，贸易商能从中赚取差价。
"Parallel car export" refers to traders purchasing new cars domestically and then selling them as used cars to other countries. Cars exported in this manner are also known as "zero-kilometer second-hand cars." Parallel import and export trade often occurs between markets with significant price differences for automobiles. For instance, some traders previously sold parallel-imported cars in China, where these models were either in high demand or could be sold at a premium, allowing traders to profit from the price differential.
中国从2019年4月正式启动二手车出口业务，开放了10个试点地区，2020年试点范围扩大至20个。中国车辆进出口有限公司（下称“通用技术中国车辆”）总经理顾超罡介绍，真正的二手车出口业务并没有爆发，2019年和2020年出口量分别仅有3000辆、4300辆。2021年，部分嗅觉敏锐的企业发现平行出口模式利润更高，市场迅速上量，当年二手车出口达1.5万辆。通用技术中国车辆隶属于中国通用技术（集团）控股有限责任公司，成立已有40年，汽车进出口业务布局广泛。
China officially launched its used car export business in April 2019, initially opening up 10 pilot areas. By 2020, the scope of the pilot expanded to include 20 regions. Gu Chao'gang, General Manager of China Vehicles Import and Export Co., Ltd. (referred to as "General Technology China Vehicles"), noted that the real boom in used car exports had not yet occurred, with export volumes only reaching 3,000 and 4,300 vehicles in 2019 and 2020 respectively. In 2021, some businesses with keen market sense discovered that parallel export models yielded higher profits, leading to a rapid increase in market volume; that year, used car exports reached 15,000 vehicles. General Technology China Vehicles is a subsidiary of China General Technology (Group) Holding Co., Ltd., which has been established for over 40 years and has a broad layout in automobile import and export business.
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- The practice of "parallel car exports" from China, where traders buy new cars domestically and sell them as used cars abroad, has seen a significant increase in recent years. This surge was particularly notable following the Russia-Ukraine conflict in February 2022, which led to a demand gap in Russia due to international sanctions and withdrawal of foreign car manufacturers.
- In response to the booming market, Chinese traders exploited regulatory loopholes and tax differences within the Eurasian Economic Union countries (including Kazakhstan and Kyrgyzstan) to export cars more profitably. However, by early 2024, Russia began tightening regulations, closing loopholes that allowed for cheaper customs processes through intermediary countries.
- Despite these challenges, parallel car exports have become a substantial part of China's trade with Russia, prompting both small and large-scale traders to adapt their strategies. The industry is moving towards more regulated practices with increased costs and longer capital turnover times due to new Russian import policies.
The Horgos Port in Xinjiang has seen a decline in the number of "zero kilometer second-hand cars" awaiting customs clearance, reflecting changes in the parallel car export business. This trade involves purchasing new cars domestically and selling them as used abroad, capitalizing on price differentials between markets. Initially lucrative, the payment for delivering these cars to nearby Kazakh towns has significantly decreased [para. 1].
China's formal entry into the used car export market began in April 2019 with pilot areas expanding from 10 to 20 by 2020. Despite modest beginnings, with exports totaling only a few thousand vehicles in the first two years, a surge occurred in 2021 with 15,000 vehicles exported due to increased profitability recognized by businesses [para. 2].
The Russia-Ukraine conflict in February 2022 led to many multinational automakers exiting Russia, creating a demand-supply gap that benefited China’s parallel car export market. New car sales in Russia dropped dramatically from over 1.6 million units in 2021 to under 700,000 units in 2022 [para. 3].
From mid-2022 through 2023, traders capitalized on this opportunity by re-exporting cars initially stuck at Tianjin Port due to emission standards issues directly to Central Asian countries and Russia. The Eurasian Economic Union (EAEU), which includes Kazakhstan and Russia among others, allows registered vehicles free movement within member states. Some countries like Kyrgyzstan offer favorable tax conditions that significantly lower costs for traders [para. 4][para. 5].
By 2023, China’s used car exports had escalated dramatically to about 300,000 units annually with major trading activity at ports like Horgos and Kashgar near EAEU countries. The rapid increase led to over a thousand vehicle clearances daily at its peak at Horgos Port alone [para. 6].
However, regulatory changes are impacting this booming trade. In early 2024, Russia issued decrees tightening controls on parallel imports and requiring proper tax payments and value declarations for vehicles transiting through Central Asia into Russia. This policy shift is expected to increase costs for traders and potentially slow down the previously rampant growth of parallel exports [para. 7].
Parallel exporting has been straightforward without needing extensive product certifications thus far but is now facing challenges due to new Russian regulations which could force traders either to seek manufacturer authorization or continue paying higher taxes under stricter oversight [para. 8].
Despite these challenges, some traders are exploring other markets while major players remain focused on adapting strategies within existing frameworks. The industry is moving towards more regulated operations focusing on quality service provision alongside vehicle sales [para. 9].
In summary, while China’s parallel car export market experienced significant growth facilitated by geopolitical shifts and regulatory environments conducive to trade arbitrage opportunities across borders, recent policy changes are poised to reshape the landscape requiring adaptability and strategic shifts from exporters [para. 10].
- China National Vehicles Import & Export Corporation
中国车辆进出口有限公司 - China National Vehicles Import & Export Corporation, referred to as "General Technology China Vehicles," is a subsidiary of China General Technology (Group) Holding Co., Ltd. Established for 40 years, it has a broad layout in the automobile import and export business. Despite the growth in used car exports, the real boom did not occur, with exports only reaching 3,000 units in 2019 and 4,300 units in 2020.
- Xi'an Parallel Import Automobile Trading Co., Ltd.
西安平行出口汽车贸易有限公司 - Xi'an Parallel Import Automobile Trading Co., Ltd. saw an opportunity when a batch of parallel import cars was stuck at Tianjin port due to not meeting domestic emission standards. Around June 2022, the company redirected these vehicles to Central Asian countries and Russia, capitalizing on the demand in Russia following the exit of multinational car companies due to the Russia-Ukraine conflict.
- After Having a Car
有车以后 - After Having a Car is an automotive content and e-commerce internet company. It invests in "Car Little Bee," a company that acquires new car resources to wholesale to county-level dealers and also engages directly in B2C domestic and foreign new car e-commerce. Despite the speculative nature of parallel car exports and the risks associated with international trade, After Having a Car could not resist the lucrative opportunities presented by this market.
- Auto Bee
车小蜂 - Auto Bee, an automotive supply chain company invested in by "You Che Yi Hou," primarily acquires new car resources to wholesale to county-level dealers. It also engages directly in B2C domestic and international new car e-commerce. The company has been exploring parallel car exports due to the high profits involved, as influenced by a friend of Xu Chenhua, the founder and CEO of "You Che Yi Hou," who profited significantly from such exports in 2003.
- Sell Good Cars
卖好车 - Sell Good Cars is an automotive trade and supply chain platform. The company's Import and Export Division General Manager, Wang Congyi, mentioned that cities like Almaty in Kazakhstan and Bishkek in Kyrgyzstan have become hubs for parallel export cars. Some traders even rent showrooms locally to display various car models for Russian customers to choose from.
- Li Auto Inc.
理想汽车 - Li Auto Inc., a NASDAQ-listed company, has become one of the most popular brands for parallel exports, especially in Russia. Its large SUVs with extended-range hybrid technology are well-suited for the Russian market, where they serve as affordable alternatives to luxury vehicles. Despite its success in parallel exports, Li Auto aims to expand globally without officially entering Russia through direct sales or authorized dealerships.
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