Georgia’s Role in the Global Used Car Market: A Pathway to Russia

The small nation of Georgia has emerged as a pivotal hub in the international used car market, primarily sourcing vehicles from the United States. A significant number of these cars are reportedly ending up in Russia, despite official restrictions aimed at curbing such trade.

Located just 20 kilometers southeast of Tbilisi, the industrial town of Rustavi features vast open-air car parks filled with thousands of used vehicles. These spaces, comparable in size to over 40 football fields, showcase an impressive array of cars—from luxury brands like Mercedes and Porsche to popular models such as Toyotas and even Teslas. One of the largest operations in the area is Caucasus Auto Import (CAI), which specializes in buying damaged vehicles from U.S. auctions. Many of these cars are deemed total losses by American insurance companies due to their accident histories.

David Gulashvili, CAI’s deputy chief executive, explains that their team in the U.S. picks up these vehicles, organizes their export to Georgia, and oversees repairs by local mechanics. Since CAI’s establishment in 2004, it has significantly contributed to modernizing Georgia’s automotive landscape, which was once dominated by outdated Soviet-era models.

In recent years, Georgia has seen a boom in car imports, totaling approximately $3.1 billion last year. The country then exported around $2.1 billion worth of these vehicles, mainly to former Soviet states in the Caucasus and Central Asia, making cars Georgia’s second-largest export by value after copper ore.

The bustling car market in Rustavi attracts customers from across the region. Alisher Tezikbayev, who traveled from Kazakhstan, explains that his group has been re-exporting cars from Georgia for several years. They assist clients in selecting vehicles, which are then transported to Kazakhstan, highlighting the growing demand in that market.

Historically, Georgia exported used cars to Russia, but this changed following Russia’s invasion of Ukraine in 2022. In September 2023, the Georgian Revenue Service announced restrictions on re-exports of automobiles imported from the U.S. or Europe to Russia and Belarus, citing compliance with Western sanctions.

Despite these official stances, an investigation by Georgian media outlet Ifacti revealed various loopholes exploited by car dealers operating near the Russian border. While Gulashvili asserts that CAI has ceased all transactions with Russia since the onset of the war, he admits there is no effective way to monitor the ultimate destinations of the re-exported cars.

Since the invasion, there has been a sharp increase in used car exports to Kazakhstan, Kyrgyzstan, and Armenia—countries that are part of the Russia-led customs union. Data from Georgia’s national statistics agency indicates that exports of used cars to Kazakhstan skyrocketed from 7,352 in 2022 to 39,896 in 2023.

Georgia’s geographical location enhances its appeal as a trade hub, providing access to Europe via Black Sea ports and connections to Central Asia through Azerbaijan. The country also benefits from relatively low labor costs for repairing salvaged cars. Gulashvili notes that while it is often economically unfeasible to repair damaged vehicles in the U.S., it is much more practical in Georgia. “It costs about $5,000 and takes six months to fix a car in the U.S.,” he explains. “In Georgia, it costs around $1,000 and takes just one month.”

In Tbilisi, mechanics like Zaza Andreashvili emphasize their expertise in repairing car engines. With nearly three decades of experience, he understands the intricate workings of automotive machinery. Nearby, Roma and his apprentice Boris work on body repairs, showcasing their skills in restoring vehicles to roadworthy conditions.

The demand for electric and hybrid vehicles is also on the rise in Georgia. Gulashvili reports that about 30% of the cars imported now fall into this category, with hybrid models like the Toyota Prius seeing explosive growth rates.

Moreover, CAI is actively engaged in importing vehicles to Ukraine, particularly pickup trucks that are utilized in the ongoing conflict. While this market presents challenges, including high costs and risks, Gulashvili remains optimistic about establishing a presence there.

As Georgia continues to carve out its niche in the used car industry, the interplay of geography, demand, and economic factors shapes its role in the broader international market, making it a significant player in the flow of vehicles across borders, including those heading into Russia.