As the demand for affordable vehicles continues to surge, the small South Caucasus nation of Georgia has emerged as a surprisingly dominant hub for the international used car trade, with many vehicles making their way to neighboring Russia.

The Rustavi Car Markets

Located just 20 kilometers (12 miles) from Tbilisi, the capital, Rustavi is home to expansive open-air car markets that resemble football fields filled with a plethora of used cars. From luxury brands like Mercedes and Porsche to reliable models like Toyota, Georgia boasts a rich selection of vehicles, with an increasing presence of Teslas in the mix.

Caucasus Auto Import (CAI)

One prominent player in this booming market is Caucasus Auto Import (CAI), which specializes in sourcing heavily damaged used cars from the United States. These vehicles are typically deemed 'total loss' by American insurance companies, but CAI's skilled team carefully navigates the purchasing process, arranging for the cars to be shipped over 10,000 kilometers (6,000 miles) to Georgia’s Black Sea ports, where local mechanics undertake repair tasks.

David Gulashvili, CAI’s deputy chief executive, notes a marked transformation in the Georgian automotive scene since the company’s inception in 2004. "At that time, our car fleet was dominated by Soviet-era models," he explains. "Now, there's a high demand for Western-produced vehicles, and our workforce has grown to 600 employees."

Economic Impact

The statistics speak volumes about Georgia's burgeoning car industry, which saw imports worth $3.1 billion in 2022, of which $2.1 billion came from car exports primarily to former Soviet states in the Caucasus and Central Asia. Remarkably, cars have become the second-largest export for Georgia, following copper ore.

The Trade Dynamics

Visitors to the Rustavi car market often hunt for the best deals, with each vehicle’s details displayed on a card in the windshield. Some entrepreneurs from countries like Kazakhstan establish businesses around this trade. Alisher Tezikbayev, who has been re-exporting cars to Kazakhstan for over three years, reveals his strategic operations involve bringing clients to Georgia to personally select their vehicles.

However, the geopolitical landscape poses significant challenges. Although cars were previously sent to Russia, trade routes have become strained post Russia's invasion of Ukraine in 2022. Georgia's Revenue Service has imposed restrictions on re-exporting American and European automobiles to Russia, officially halting what was once a significant trade avenue.

Geopolitical Challenges and Opportunities

Despite official narratives, investigative reports have surfaced detailing the existence of loopholes exploited by enterprising car dealers circumventing these sanctions. Gulashvili insists that CAI has ceased all dealings with Russia. However, the broader industry is less transparent, complicating the picture of post-invasion trade.

Notably, Georgia has seen an explosion in used car exports to Kazakhstan, with numbers surging from 7,352 in 2022 to 39,896 in 2023. This increase underscores the need for vehicles in Kazakhstan, where imported cars can be driven into Russia with minimal tariffs.

Strategic Positioning and Repair Costs

Geographically, Georgia is well-positioned as a trading hub, with its Black Sea ports connecting it to Europe and routes through Azerbaijan facilitating access to Central Asia. Additionally, the low cost of labor makes repairing salvaged American cars economically viable compared to doing so in the U.S.

Mechanics like Zaza Andreashvili, who has been in the engine repair business for nearly three decades, showcase the skills that have emerged in Georgia’s automotive scene. The repairs are efficient: in Georgia, a rebuilt car can get back on the road for about $1,000 in a month, contrasted with $5,000 and six months in the U.S.

Emerging Trends in Electric Vehicles

Amid this dynamic market, a growing interest in hybrid and electric vehicles has surfaced, leading to a marked increase in demand. Gulashvili notes that approximately 30% of current imports are hybrid models, with a reported growth rate that is staggering.

Interestingly, the Tesla market is thriving in Ukraine, where CAI has established a workforce to meet the demand, and pickup trucks are being actively shipped as part of the efforts to aid in the conflict against Russia.

Conclusion

Georgia's unexpected rise as a major player in the used car market paints a complex picture of supply, demand, and the intricate web of geopolitical factors influencing contemporary trade. As the country continues to navigate the fallout from global conflicts, its automotive industry stands resilient, adapting to meet both local and international needs.