How the country became a used car hub

The small country of Georgia in the South Caucasus has become a multi-billion-dollar center for the international used car market. Most of the vehicles are sourced from the US, and it looks like a lot of them will end up in Russia.

On the dusty outskirts of the industrial city of Rustavi, 20 kilometers southeast of the Georgian capital, Tbilisi, there is a large area of ​​outdoor parking.

It is the size of more than 40 football fields, and hosts thousands of vehicles for sale.

You can find almost any car you want – Mercedes, Porsche, Jaguar, Toyota, and more recently, Tesla. They are all here.

One of the largest parking lots is owned by Caucasus Auto Import (CAI), a company that buys used cars from auctions in the United States. Vehicles were often damaged so badly in accidents that they were written off by American insurance companies.

CAI says its “team of experts” in the United States will personally receive the cars, then arrange for their export by container ship, a distance of 10,000 kilometers (6,000 miles) to a port on Georgia’s Black Sea coast. The damaged cars will then be repaired by Georgian mechanics.

“Our company has contributed a lot to the renewal of the Georgian automobile fleet,” says David Golashvili, Executive Vice President of CAI. “When we started our business in 2004, Georgian automobile infrastructure was entirely Soviet-produced, e.g. [Soviet brands] Lada and Vaz.”

He says his company responded to “the huge demand for vehicles produced in the West.” Today the company has 600 employees.

Last year, Georgia imported cars worth $3.1 billion (£2.4 billion), according to official figures. It then exported $2.1 billion worth of cars, mainly to the former Soviet republics of the Caucasus and Central Asia. The cars are actually Georgia The second largest export In terms of value, after copper ore.

Across Rustavi’s huge car market, curious customers look for a bargain. Each car has a card inside the windshield indicating the price, engine size and date of manufacture.

Alisher Tizikbayev traveled here from Kazakhstan. He and a group of his friends explore the Toyota division.

“We have been re-exporting cars from Georgia for about 3.5 years. We send cars to Kazakhstan and organize car tours, when customers come to Georgia to choose their own cars,” says Tizikbayev, who posts videos to his 100,000 followers on TikTok.

Georgia used to export used American and European cars to its northern neighbor, Russia, with which it shares a border. But that officially stopped as a result of Russia’s invasion of Ukraine in 2022.

In September 2023, the Georgian Revenue Service announced that, in line with recent Western sanctions against Russia, it would restrict the re-export and transit of cars imported from the United States or Europe into Russia and Belarus.

Georgian officials have long denied that their country is complicit in helping Russia evade the trade embargo.

After a Last investigation Georgian media publication Ifacti showed several loopholes exploited by an army of car dealers on both sides of the Russian-Georgian border.

David Golashvili says his company no longer has any trade with Russia. He added: “From the first day of the war, we restricted any kind of transactions from Russia, and any kind of exports to Russia. You will not see a single car exported to Russia by Caucasus Auto Import.

But he adds that there is no mechanism to monitor the final destination of re-exported cars to other countries.

Since the Russian invasion of Ukraine there has been a sharp rise in used car exports to Kazakhstan, Kyrgyzstan and Armenia – all members of the Russian-led customs union.

This means that a car registered in any of those countries can be driven into Russia with minimal customs duties.

Figures from Georgia’s National Statistics Agency indicate that cars are already heading to Russia. It says that in 2022, Georgia exported 7,352 used cars to Kazakhstan, while in 2023 the number reached 39,896, an increase of more than five times.

While geopolitical machinations persist, the modest success of Georgia’s used car industry can be explained by its geography. It has access to Europe through its ports on the Black Sea, and to Central Asia via Baku, on the Caspian Sea coast adjacent to Azerbaijan.

Another key element is reasonable labor costs when it comes to repairing salvaged cars.

“These cars that are damaged in the United States, most of the time it doesn’t make economic sense to rebuild them in the United States,” Golashvili says.

“That’s because the human resources cost, the service costs are much higher, the legal costs to get those cars back on the road, it takes a long time and it’s a very expensive process.

“In the United States, it takes six months and say $5,000 to rebuild a car, and make it legal again. It takes $1,000 and one month in Georgia to fix the same car.

In a sprawling warehouse on the outskirts of Tbilisi, Zaza Andriashvili bends over a car engine mounted on a specialized platform. The mechanic points to the cylinders he just cleaned.

“The engine is the heart of the car. Just like in humans, if your heart stops working, you die. It’s the same for cars, if the engine stops working, the car dies.

Mr. Andriashvili has been repairing automobile engines for nearly 30 years. “We used to learn through books, and there was no Internet at that time,” he says.

Next to Mr. Andriashvili’s workshop, there is a lot of noise. Roma and his student Boris specialize in auto body repairs.

Using a panel beater, Boris reshapes the near side wing of a mangled car. Roma, who wears his brown T-shirt with “USA” written across the front, says he’s been fixing cars for 50 years.

“Mercedes has the best metal, Volvo and Toyota are good too, but on some cars the bodywork is so thin it’s like a piece of paper,” he says.

While most cars imported into Georgia are powered by gasoline and diesel, Golashvili says there is a fast-growing demand for electric vehicles, especially hybrid vehicles.

“About 30% of the cars we bring in now are hybrids. They are not fully electric, but they are hybrids like the Toyota Prius. The growth rate is off the charts, it is 300 to 400% on a quarterly basis.

Golashvili adds that the largest market for reselling Tesla cars is Ukraine, where he has 100 employees.

“It is very expensive and very risky, but we are still trying to get traction there. We also import a lot of small trucks into Ukraine, which are used to fight against Russia.