SUV exporting and straw buying big issues for car makers

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Gray market luxury SUV exporting is a huge business, and car makers hate it. Image from Wikimedia Commons.

Gray market luxury SUV exporting is a huge business, and car makers hate it. Image from Wikimedia Commons.

Luxury SUVs are a huge business, but the companies that make them are hurting due to private SUV exporting. Straw buyers purchase vehicles in First World countries and ship them to other markets to sell or deliver to customers who purchase them, and the auto industry is not amused.

SUV exporting is why Land Rover wants a background check

A recent Jalopnik post exposes the fact that buying a luxury SUV these days involves an extensive credit check/background check and the reason is gray market SUV exporting.

Many of the countries with the largest demands for luxury vehicles – China, Russia, Brazil and so on – levy enormous taxes on imported goods, so foreign car companies have to charge a lot. Ergo, a Range Rover in, say, China has an MSRP several times that in the United States.

Exporters/importers send straw buyers to dealerships to purchase the vehicles. The cars are exported and sold at a markup from what the straw buyer paid. Exact amounts vary, but double the original purchase amount – though still much less than local MSRP – is not uncommon.

Many goods are sold through similar schemes; firearms are another heavily straw-bought item. Mexican cartels get a lot of their guns in this manner from the United States, thanks to both lax gun laws and Eric Holder.

Box em and ship em

If John Q Public wants to ship his personal vehicle to another country so he can still drive it when he moves there, that’s generally legal. Exporting a used vehicle is also legal. SUV exporting and luxury car exporting however…isn’t exactly above board. It isn’t quite black market, but it isn’t exactly legal either.

Usually, export schemes involve some manner of fraud. First, dealerships are defrauded when buyers don’t announce or lie about intentions to export, which luxury car makers prohibit in sales contracts. The exporters/importers often use phony registration schemes to classify the vehicles as used. Finally, the necessary documents for exports are often fudged to make the transaction appear legal.

However, these aren’t stolen goods; they all get paid for, meaning the legal owner…to some degree…has paid for their property, and is seeking to get a higher price for it by selling it overseas for less than the car maker.

Big trade

According to a 2013 Wall Street Journal article, this kind of luxury car and SUV exporting sent at least 35,000 vehicles out of the US per year. It’s big business. A BMW X5 sells for under $60,000 in the U.S. The Chinese pay about an extra $100,000 on top. A Range Rover costs at least $80,000; in China, it’s costs the equivalent of more than $450,000. In Brazil, a Porsche Cayenne SUV costs the equivalent of $200,000; it goes for a little less than the aforementioned X5 domestically.

The auto industry already exports about 1.5 million cars from the United States per year, according to Forbes. It isn’t so much that they’re going broke, and frankly these are companies that really don’t need the help (as if the bosses don’t have enough edge) but it’s more that it chips away at their bottom line. It also precludes the possibility of selling dealership upgrades and service packages. (Nothing is worse than whining billion-dollar multinationals.)

However, because of the no-export clause, dealerships that sold vehicles that wind up exported, even inadvertently, get punished by stock reductions, administrative fees and with other methods. People who engage in this business often have their assets seized by federal agents, often without being charged with a crime.

It isn’t exactly a crime, but it isn’t exactly white hat, either.

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