Law of the Mountains: Georgia tightened restrictions on the re-export of cars to the Russian Federation

Georgia has introduced additional restrictions on the re-export of cars to the Russian Federation. Now, citizens of Russia and Belarus are not allowed to export cars from Georgia that were delivered to this country from other countries. Given the small share of "Georgian" cars in the Russian market, experts do not foresee serious problems with the shortage of cars due to the new bans. However, experts believe that certain difficulties may arise. Details can be found in the Izvestia article.

"And he took away the car..."

The Georgian authorities have imposed new restrictions on the supply of cars imported through third countries to the Russian market. Now it is forbidden for citizens of Russia and Belarus to import such cars anywhere. This is reported by TASS with reference to the statement of the Ministry of Internal Affairs of this Transcaucasian country.

"Georgia complies with the sanctions imposed by the United States, Great Britain and the European Union against Russia, in particular the 11th package of sanctions, according to which citizens of Belarus and Russia are prohibited from re-exporting cars from Georgia to third countries," the agency said in a statement.

Photo: RIA Novosti/Vitaly Ankov

This is not the first attempt by the Georgian authorities to ban the export of cars to Russia. So, in August 2023, a ban was imposed on the re-export of American-made models from Georgia, and at the end of September, similar measures came into force for cars manufactured in EU countries.

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Despite this, "Georgian" cars continued to be imported into our country, albeit in much smaller volumes than before. For example, if in July 2023, according to the National Statistics Service of Georgia, slightly more than 1 thousand cars were exported to Russia, then in August of the same year their number immediately decreased by 12 times to 85.

"Spinning, spinning under my feet"

According to the analytical agency Autostat, only 7% of used cars imported to Russia last month were imported from Georgia. In terms of imports of used models to Russia, this Transcaucasian state ranks fourth, seriously behind China (11%, third place), South Korea (24.5%, second place) and Japan (48%, first place).

Photo: Global Look Press/Cfoto

In the segment of new cars, the share of car imports from Georgia is significantly lower and amounted to only 0.9% in April. By a significant margin, it is ahead of Kazakhstan with a share of 2.8%, Belarus (7.2%), South Korea (9.5%), Kyrgyzstan (12%). The leader here is China, from which 64.7% of all imported cars were imported to Russia last month.

"Thanks, I'll walk..."

Given the small volume of car imports from Georgia, the new ban will not have a noticeable impact on the Russian market, says Igor Morzharetto, partner at the Autostat analytical agency.

— If cars from Georgia stop being supplied to our country, nothing fatal will happen. Given the insignificant share of such cars in the secondary market and literally single deliveries of new cars, the market simply will not notice this loss," Igor Morzharetto told Izvestia.

At the same time, according to the expert, Georgian citizens who are somehow connected with the export of cars to the Russian Federation will suffer more from the introduction of an additional ban.

Maxim Kadakov, the editor-in-chief of Za Rulem magazine, shares a similar point of view. According to him, those whose business is "focused" on importing cars to Georgia for their subsequent delivery to Russia will be hit.

Photo: IZVESTIA/Sergey Lantyukhov

— These are the dealers themselves, the distillers, the drivers of car carriers, and those who design these cars. At the very least, they will have to look for new sales channels for cars that are already in Georgia, establish alternative logistics chains, and possibly "insert" some additional links into them, the editor-in—chief of Za Rulem believes.

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All this will inevitably affect prices, Maxim Kadakov notes. But since the majority of cars supplied to Russia through Georgia for re—export from third countries are premium and luxury models, the additional price increase will not deter potential buyers.

— For a person who is willing to pay tens of millions of rubles for a car, a difference of 500 thousand or even 2 million will not play a significant role, — he believes.

"I'll tell you one smart thing, but don't be offended."

Georgia has long served as a transit hub for the import of used cars, including premium models from Europe, the United States and Asia, which then entered the Russian Federation through "gray" schemes, said Irina Frank, CEO of Frank Auto. The elimination of this channel will lead to a shortage of such machines in the secondary market, which will inevitably provoke price increases, she believes.

Photo: TASS/Sergey Bobylev

— Market participants are likely to start using alternative routes more actively. However, this will entail an increase in transportation costs, customs difficulties and risks. However, the restructuring of logistics will take time, which means that the market will face delays in deliveries and additional costs, which will affect the cost of cars for end customers, Irina Frank told Izvestia.

In addition, new bans may lead to the market going into the shadows, the expert believes. Some suppliers may enter the illegal field by offering cars with questionable history, which will increase risks for consumers, including buying cars with broken VIN numbers, she explains.