Foreigners dominate used-vehicle export trade in Japan

Auction houses feature prayer rooms and curry shops

by Tomoko Otake

KOSHIGAYA, Saitama Pref. — There is a bleep, pictures of cars pop up on two big screens, and meters show prices rising.

Every Saturday at Tokyo Ryutu Auction, a used car auction site, 1,000 men of all nationalities congregate to bid.

One recent afternoon, some were apparently transfixed by the screen images and were furiously pressing computerized bidding switches at their seats. Others handled calls from overseas clients on their cell phones.

In a prefab shed behind the main building, a man was taking a moment of silence from all the buzz, praying in the direction of Mecca; though small, the auction house has space for Islamic prayer.

Some 160 car auction houses across Japan play an increasingly important role in the nation’s exports of used cars, which are blossoming into a more than 300 billion yen industry.

And foreigners in Japan, especially those from South Asia, dominate the trade of used vehicles for export.

“This auction house is friendly to foreigners,” said Zulfiquar Ali, a 36-year-old Pakistani dealer.

Last year, Japan exported 712,068 used cars, trucks and buses, according to Finance Ministry statistics. Combined with some 150,000 units that are shipped as cargo to Russia via fishing vessels, and another 150,000 or so bound all over the world but excluded from trade statistics due to their small values, the total number of overseas-bound used cars is estimated at 1 million.

Industry experts say this figure includes roughly 60,000 cars stolen and smuggled out of the country by international crime syndicates.

Recent news that a French national believed to be a senior member of al-Qaeda worked as a used car dealer in Niigata Prefecture between July 2002 and last September caused many dealers to fear their reputations and businesses will be damaged, an industry official said.

But according to Naim Arain, a Pakistani exporter of used cars and car parts, the alleged involvement of Lionel Dumont in al-Qaeda in no way represents the majority of those engaged in car exporting operations.

Dumont “didn’t have al-Qaeda written on his face,” Arain said at his office-cum-home in the city of Saitama. “I saw the news on TV about a Pakistani car dealer working with him, but my feeling is that he didn’t know about (Dumont’s) background, and he was just being nice to the guy because they knew each other through the same religion.”

Arain, who is the leader of a group of foreign dealers at Tokyo Ryutu Auction, said he has not heard of any Islamic mosque in Japan that is a breeding ground for al-Qaeda.

Of some 800 active used car exporting firms in Japan, 350 are believed to be owned by Pakistanis, 100 by Bangladeshis and another 100 by Sri Lankans, according to the Japan Used Motor Vehicle Exporters Association.

At Tokyo Ryutu Auction, 300 of the 1,000 dealers who show up each week are foreigners, of whom 80 percent are Pakistani nationals, said Tsutomu Mori, chief executive officer, adding that there is also a sizable population of Bangladeshi, Sri Lankan, New Zealand, Russian, Korean and Chinese dealers, as well as those from Africa.

“Made-in-Japan” vehicles are in strong demand overseas thanks to their reputation as sturdy cars, industry officials say. The fact that many Japanese drivers are inclined to buy new models every few years is also a boon for overseas customers craving cheap cars, they say.

“Only in Japan are cars that have run 100,000 km scrapped,” Mori said. “Abroad, people say Japanese cars are used until the mileage hits 400,000 km.”

A Japanese dealer who was at the Koshigaya auction site said the nation’s notorious, and very costly “shaken” mandatory overhaul system, in which drivers must get their cars tested and have worn-out parts replaced every two years, means used cars here remain in near mint condition.

Ali purchased 24 used cars and trucks, including numerous Toyota models, such as the Mark II, HIACE and Corolla that day, for an average of 300,000 yen to 400,000 yen apiece.

“The money is great,” Ali said, adding that his profit margin averages at 10 percent to 20 percent. His company, Alibaba International, has 19 employees and rakes in 700 million yen in sales per year. He also has his own showrooms in Tanzania and Dubai, where he travels six or seven times a year.

Like Ali, who is married to a Japanese and has two kids, “nearly 100 percent” of the foreign dealers are married to Japanese women and speak fluent Japanese, an industry official said.

But the trade comes with risks, sometimes costly. Governments of the nations these cars are bound for can change regulations on a whim, leaving exporters stranded.

About 1 1/2 years ago, Salimur Rahman Khan, manager of Kauser Trading Co., a Tokyo-based car exporter, bought 50 used Mark II sedans for Saudi Arabia, whose people he said are “crazy” for the model.

Just as Khan shipped the cars to Dubai, a major relay point for Japanese used cars to Southeast Asia, Africa and Europe, the Saudi government announced it was banning dealers from selling used cars that had their steering wheels changed from the right side to the left.

Dealers in Dubai, who had previously bought vehicles with right side steering and had them converted, refused to buy Khan’s cars, and he ended up having them scrapped in Dubai.

Despite the risks, Khan, an Indian national who also works as an Arabic lecturer at Chuo University, said the business fascinates him.

“Once you learn, it’s so much fun, it’s hard to quit,” Khan said, after successfully outbidding others to make his 26th purchase of the day — a green Subaru Legacy wagon for 135,000 yen.

Some domestic dealers are feeling the squeeze of increased competition and raising eyebrows over the growing presence of foreigners, industry experts said.

But it was also the foreigners who helped save Tokyo Ryutu Auction, originally set up 30 years ago as a guild of four used car wholesalers, from extinction.

Ten years ago, when the auction operator relocated from Tokyo’s Adachi Ward to the current Koshigaya site, it struggled to attract bidders. After the group stopped charging fees for unsold cars, the number of foreign participants surged. What the group did next was reach out to them, though timidly at first, to meet their needs, Ryutu’s Mori said. A prayer house and a curry house were created along the way.

“It took a lot of effort on our part to get to know them (Muslims),” Mori said. “We had to fight our own inner stereotypes. But it was our collaboration with them that helped us find a way out of our financial crisis.”