South Asian Migrant Entrepreneurs in the Used Vehicle and Used Parts Trade and the Circular Economy

Résumé:

Purpose

Japan is a major hub for the export of right-hand-drive used vehicles and parts. South Asian migrant entrepreneurs from Pakistan, Sri Lanka, Afghanistan, and Bangladesh primarily drive this trade. Investigating the history and current state of Japan's used-vehicle and parts market helps provide a clearer picture of the automotive industry's circular economy.

The trade regulations (import restrictions) of destination countries, rather than Japan's own industrial policies as an exporting nation, significantly influenced the trends in Japan's used-vehicle and parts trade. Notably, the import regulations of South Asian countries, key destinations for South Asian migrant entrepreneurs, are characterized by sudden, substantial changes.

What reasons have driven the fluctuations in South Asian countries' import regulations? How have these fluctuations impacted the used vehicle and parts trade industry? Furthermore, how have South Asian entrepreneurs responded to these changes in trade regulations? This report organizes the historical background and current market trends to present their structural characteristics.

Methodology

The research methodology consists of qualitative fieldwork and interviews, primarily targeting South Asian migrant entrepreneurs based in Japan who originate from Pakistan, Sri Lanka, Afghanistan, and Bangladesh. Additionally, it incorporates analysis of government statistical data on population and trade from each country.

Findings

The primary factors behind past significant tightening of import regulations on used vehicles and parts in South Asian countries were increased pressure from domestic new-vehicle manufacturers and heightened pressure from the IMF, against a backdrop of deteriorating foreign-exchange reserves. In other words, the government significantly tightened regulations for political rather than economic reasons.

While raising import tariffs was the primary method used to restrict used vehicles and parts, in recent years, lowering tariffs on electric vehicles (EVs) as an environmental measure was the alternative. Sri Lanka, Fiji, and Mongolia are prime examples of this approach.

Furthermore, South Asian entrepreneurs have relocated their business operations from their countries of origin to other nations in response to these changes in trade regulations. Potential relocation destinations include Japan as a sourcing hub; the United Arab Emirates, Chile, and South Africa as re-export trade hubs; and Oceania countries like New Zealand and Fiji, as well as East African nations such as Kenya and Uganda, as markets for right-hand-drive vehicles.

Practical and theoretical implications

As mentioned earlier, investigating the history and current state of Japan's used-vehicle and parts market contributes to understanding the broader picture of the automotive circular economy, particularly the market trends for right-hand-drive vehicles.

For instance, environmental regulations like reducing tariffs on used EVs have been somewhat positively evaluated by environmental economists. On the other hand, used EVs are difficult to repair, posing challenges for their handling in developing countries. People who view the competition for rare metal resources as a threat raised concerns about the accumulation of discarded lithium-ion batteries in developing countries. Currently, local repair shops can handle EV repairs to some extent, and this is not considered a problem. From the perspective of migrant entrepreneurs, key players in the used-vehicle and parts trade industry, this study outlines the history and current state of the circular economy for right-hand-drive vehicles. It explores potential future connections with similar research on left-hand-drive vehicles.