How To Make Thousands Selling Grey Market Cars

2015 BMW X6Did you know that new car dealerships in China charge two to three times more than what the exact same car would cost in the US?

For example, a new BMW X6 (a favorite in China) that starts at $62,000.00 in the US will fetch a whopping $170,000.00 at a dealership in China.

Those inflated prices reflect hefty taxes and a 25% tariff, but a report from Bernstein Research stated that even after accounting for the taxes and tariffs that a new car in China still costs almost 40% more than it does in the US.

Enter the grey market entrepreneur

What has happened is that some smart entrepreneurs are making huge profits buying new luxury cars in the US and then shipping them to China. You know, fill the need. Good ol Supply and Demand economics.

There’s nothing new with selling grey market cars, although China’s venture into capitalism has definitely created a massive market that didn’t exist before. (A “Grey Market” car is a new or used vehicle that is legally imported from another country outside of the manufacturers official distribution system.) Buy a new Tesla Model S for $81,000.00 in the US and sell it in China for an easy and pretty much guaranteed $120,000.00. Hey man, you just scored a gross profit of $39,000.00. Who wouldn’t want to do that?

The fly in the ointment

Well there’s a bit of a problem. The problem is that the manufacturers of these high-end luxury cars have been ruining all the fun by colluding with the US government to stop the sale and export of these cars. That’s right, the US government has been sending Secret Service agents to the dealerships when the dealer tips them off that they have a buyer suspicious of being an exporter.

BMW’s list of red flags used to spot proxy / straw buyers

Here’s the list BMW dealers use to spot potential proxy, or straw buyers. (A “proxy” or “straw buyer” is someone that is buying a car for an exporter.)

  • BMW X5 or X6 with 3.5-liter engine
  • Payment with cash or bank cashier’s check
  • No down payment, credit card in a different name, or credit-card number only without the card
  • No trade-in and no test drive
  • Purchased at other stores
  • Student purchasers (Yup, exporters pay em about $500.00 to buy a car.)
  • Same address as someone else on the list of exporters
  • Refuses to sign a non-export agreement

Questions

Why would the manufacturers want to stop the export of grey market cars? Their motivation would be to protect their dealerships in China. Okay, I get that the manufacturers don’t want grey market cars undercutting their dealerships by thousands of dollars. But why on earth would the US government get involved in stopping you from selling your personal property to whomever you choose? And in turn, hinder sales of vehicle in the US and protect the high-end luxury car market in China? Am I the only one that thinks this is insane?

Sanity prevails

No, I’m not the only one that thinks this is insane because a sane federal judge in Ohio recently ordered the government to return a Porsche, Range Rover and the $1.2 million in cash they seized, i.e. stole, from Automotive Consultants in Hollywood, California. Why did the judge make this ruling? She, judge Sandra Beckwith, said that the prosecutors failed to provide any evidence that Automotive Consultants broke any laws. That’s right – no laws were broken! I feel sorry for Automotive Consultants because I’m sure the cost to get their property back was horrendous, but this judges ruling is a positive sign that sanity might prevail.

By the way, this exporting stuff works with used cars too. :-)

Thanks for stopping by to read this.

Steve

P.S. I read and reply to all comments so please leave your comments or questions below.

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8 thoughts on “How To Make Thousands Selling Grey Market Cars

  1. Jerry

    Hi Steve, do you have any suggestions for how I can get into this exporting thing?

    Reply
  2. Susan

    My husband and I are very familiar with the high cost of cars in China. (We live in Beijing.) We are going to look into partnering with family members in the US to do something like this.

    Thank you for writing this article.

    Reply
    1. Admin Post author

      Hey that’s really cool, Susan! Even though importing and exporting cars is totally legal, it seems like you might avoid a lot of hassles if you deal in cars that aren’t on this list of new super high in demand cars that are being scrutinized by the manufacturers.

      Reply
  3. Mike

    What do you think about exporting used cars instead of new cars?

    Reply
    1. Admin Post author

      Sure, if you can make a profit then why not export used cars? At least that way you won’t be dealing with those creepy snitches at the new car dealerships.

      Reply
  4. Azad

    Now these days US $ is very strong compare to Canadian $, Is some one involve importing car from Canada ?
    Any thought about it ?

    Reply
    1. Admin Post author

      If that is true then the key would be to buy the cars in Canada with the strong USD and bring them into the US to sell them. I don’t personally know anyone that is doing this but if there is enough of a difference between the value of the two currencies then I don’t see why it can’t be done.

      Reply

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