Grey import vehicles are new or used motor vehicles legally imported from another country through channels other than the maker's official distribution system or a third-party channel officially authorized by the manufacturer. The synonymous term parallel import is sometimes substituted., Government of South Australia. Retrieved 2015-07-21.Parallel imports , World Health Organisation. Retrieved 2014-12-12.
Car makers frequently arbitrage markets, setting the price according to local market conditions so the same vehicle will have different real prices in different territories. Grey import vehicles circumvent this profit-maximization strategy. Car makers and local distributors sometimes regard grey imports as a threat to their network of franchised dealerships, but independent distributors do not since more cars of an odd brand bring in money from service and spare parts.
In order for the arbitrage to work, there must be some means to reduce, eliminate, or reverse whatever savings could be achieved by purchasing the car in the lower-priced territory. Examples of such barriers include regulations preventing import or requiring costly vehicle modifications. In some countries, such as Vietnam, the import of grey-market vehicles has largely been banned.
Overview Grey imports are generally used vehicles, although some are new, particularly in Europe where the European Union tacitly approves grey imports from other EU countries. European Commission Frequently Asked Questions on Passenger car related taxation Retrieved July 29, 2015 In 1998, the European Commission fined Volkswagen for attempting to prevent prospective buyers from Germany and Austria from going to Italy to buy new VWs at lower pre-tax prices; pre-tax price is lower in Italy, as in Denmark, due to higher tax on cars. It is even possible for car buyers in the United Kingdom to buy right-hand drive (RHD) cars in EU countries with right-hand traffic where left-hand drive (LHD) cars are the norm.Rutherford, Mike Buying a car doesn't have to be taxing, The Daily Telegraph June 2, 2010 Retrieved July 29, 2015
Japanese used vehicle exporting is a large global business, as rigorous road tests and high depreciation make such vehicles worth very little (in Japan) after six years, and strict environmental laws make vehicle disposal expensive. Consequently, it is profitable to export them to other countries with left-hand traffic, such as Australia, New Zealand, the Republic of Ireland, the United Kingdom, Malta, South Africa, Kenya, Uganda, Zambia, Mozambique, Sri Lanka, Malaysia, Bangladesh and Cyprus. Some have even been exported to countries such as Peru, Paraguay, Russia, Mongolia, Yemen, Burma, Canada, Syria and the United Arab Emirates, despite the fact that these countries drive on the right. It is actually because of these vehicles' RHD configuration that many of them are sent to LHD countries in the first place, for use as mail delivery vehicles. Many Japanese market Jeep Cherokees, for example, have found new use with rural mail carriers in the United States.
Thailand is the third largest exporter of brand new and used right-hand drive cars after Japan and Singapore, because of that country's high-volume production of diesel 4x4 vehicles such as the Toyota Hilux Vigo, Toyota Fortuner, Mitsubishi L200, Nissan Navara, Ford Ranger, Chevy Colorado, and others. The Toyota Vigo is the most exported vehicle by parallel exporters. Unlike Japanese and Singaporean exports, the majority of Indonesia's grey exports are of new vehicles and the market is dominated by two companies. One of them known as Alpha Automobile Co., Ltd. These trucks are also exported many countries include Japan due to Japanese domestic makers no longer officially selling them through authorized dealers there.
Similarly, there are exports of left-hand drive (LHD) used cars from Germany to countries in Eastern Europe, some EU countries (less likely Spain, Portugal and Greece) and West Africa (especially Ghana and Nigeria, not Senegal and its surrounding countries). Some cars in the United States are sold only as export by insurance companies due to them having been stolen and recovered, or damaged in other ways.
By country
United States Because the United States and Canada uniquely have not signed onto United Nations Economic Commission for Europe standards for automobile design (see World Forum for Harmonization of Vehicle Regulations), they use an anomalous set of motor vehicle safety and emission regulations.
For the U.S., these are developed and administered by the National Highway Traffic Safety Administration (NHTSA) and Environmental Protection Agency (EPA). They differ significantly in detail from the international UN Regulations used throughout the rest of the world.
From 1976 to 1988, individual Americans were actually able to obtain cars conforming to World Forum for Harmonization of Vehicle Regulations standards and "convert" them to vehicles compliant with U.S. regulations – this was known as the grey market, in that it was a legal activity parallel to officially sanctioned manufacturer efforts.
Vehicle manufacturers face considerable expense to type-certify a vehicle for U.S. sale this amount is not widely publicized, but Automotive News cites a 2013 model vehicle where this modification cost US$42 million. This cost particularly affects low-volume manufacturers and models, most notably the makers of high end sports cars. However, larger companies such as Alfa Romeo and Peugeot have also cited costs of federalizing their vehicle lineups as a disincentive to re-enter the U.S. market. Pre-1968 During the Second World War, American servicemen stationed in Europe experienced the benefits of light, nimble British sports cars (e.g., the MG T-type) and shipped them home on their return. There were no legal restrictions to this behavior until 1967. Some owners even acted as sales reps for manufacturers who were happy to help, leading to official imports and the British sports car craze in North America. As with future waves of imported cars, this led the U.S. automakers to develop domestic models, including the Nash-Healey, Ford Vega, Ford Thunderbird, and Chevrolet Corvette.
1968: new limitations Beginning in 1968, U.S. regulations surrounding vehicle importing became far harsher, and many vehicles, like the Mini, were immediately excluded from the market.
NHTSA and EPA regulations post-1968 criminalize the possession of a vehicle not meeting U.S. standards. Exceptions exist for foreign nationals touring the U.S. in their own vehicle and for cars imported for Show and Display purposes.
Response of market demand Unavailability of certain foreign models encouraged demand for grey-market vehicles arose during the malaise era in the late 1970s. Importing them into the US involved modifying or adding certain equipment, such as headlamps, sidemarker lights, bumpers, and a catalytic converter as required by the relevant regulations. The NHTSA and EPA would review the paperwork and then approve possession of the vehicle. It was also possible for these agencies to reject the application and order the automobile destroyed or re-exported. The grey market provided an alternative method for Americans to acquire desirable vehicles, and still obtain certification.
Tens of thousands of cars were imported this way each year during the 1980s. The vast majority of these imports were by individuals importing just one car. Many otherwise unavailable vehicles entered the US via the grey market, like the Citroën CX, Range Rover Classic, Renault 5 Turbo, and Mercedes-Benz G-Class.
1988: Motor Vehicle Safety Compliance Act The grey market was successful enough that it ate significantly into the business of Mercedes-Benz in North America and their dealers. The corporation launched a successful multi-million-dollar congressional lobbying effort to stop private importation of vehicles not officially intended for the U.S. An organisation called AICA (Automotive Importers Compliance Association) was formed by importers in California, Florida, New York, Texas, and elsewhere to counter some of these actions by Mercedes lobbyists, but the Motor Vehicle Safety Compliance Act was passed in 1988, effectively ending private import of grey-market vehicles to the United States. There have been allegations of improper lobbying, but the issue has never been raised in court.
As a result of being practically banned, the grey market declined from 66,900 vehicles in 1985 to 300 vehicles in 1995. It is no longer possible to import a non-U.S. vehicle into the United States as a personal import, with four exceptions, none of which permits Americans to buy recent vehicles not officially available in the United States.
Registered importer After 1988, a vehicle not originally built to U.S. specifications can, under certain, very limited circumstances be imported through a registered importer or independent commercial importer, who modifies the vehicle to comply with US equipment and safety regulations and then certifies it as compliant, at enormous expense. In practice, this avenue is nearly impossible, even for an extremely wealthy individual. Those who import nonconforming motor vehicles sometimes bring in more than one car at a time to spread the substantial cost of the necessary destructive testing, modification, and safety certification. Destructive crash testing is required if the vehicle is substantially similar to a model sold in the U.S.
Canadian cars in U.S. Even Canadian-market vehicles may not meet these requirements.Importing Canadian Vehicles , Environmental Protection Agency. Retrieved 2014-12-12. Since Canadian regulations are similar to those in the U.S., an individual can import a vehicle manufactured to Canadian motor vehicle safety standards if the original manufacturer issues a letter stating that the vehicle also conforms to U.S. motor vehicle standards. The decision to issue a compliance letter is solely at the discretion of the manufacturer, even if the vehicle is known to meet U.S. standards. Before issuing a compliance letter, most manufacturers request proof that the owner of the vehicle is a resident of Canada, and that the car was registered and used in Canada for a minimum period. This is done because the manufacturers maintain separate pricing structures for the U.S. and Canadian markets.
25-year rule In 1989, NHTSA granted vehicles over 25 years of age dispensation from the rules it administers, since these are presumed to be collector vehicles. However, there are two exceptions to the rule. One is California, where vehicle emissions requirements make it difficult to register a classic vehicle from overseas. (California Smog Check is mandated for automobiles 1976 and newer.) In 21 states, mini trucks (JDM market kei trucks) of any age can be legally imported and registered as a utility vehicle with on-road use and top speed restrictions varying by state, although states that allow mini trucks to be operated on public roads prohibit their operation on Interstate highways. In 2021, Maine began deregistering third-generation Mitsubishi Delica vans that were legally imported through the dispensation by classifying it as an off-road all-terrain vehicle. Rhode Island also deregistered legally imported Kei cars (including non-van models) in October 2021, citing a best practices guideline (non-legally binding) issued by the American Association of Motor Vehicle Administrators.
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