Importing and exporting cars is a highly profitable business. Since 2016, the United States has made $1.25 billion importing pre-loved vehicles and $5 billion on export. However, the big corporate experts make up only about 4% of all exporters. The remaining 96% comprises small-time exporters, perhaps the kind you want to become.
This article focuses on how to start a car exportation business, so you’ll likely find it very helpful.
Let’s dive right in.
The first thing to consider when starting car exportation is the startup cost. This will include setup fees, operating costs, and other side or indirect costs.
Setup costs include your expenses on branding, marketing, perhaps an office space or dealership, etc. Keep in mind that if you really want your business to flourish, then you would have to try out different methods of advertising strategies like vehicle branding (using vehicle wraps or custom vinyl lettering), hoarding board ads, social media commercials, and YouTube videos. However, as said earlier, all the expenses that these will bring with them will fall into the category of “Setup costs”.
Sales commission, vehicle depreciation, and others factor into your operating cost. In comparison, indirect costs are incurred while recruiting and managing staff. You should weigh the costs alongside your expected returns to know if it’s worth it. But it is worth it if you can take the pain to strive for success.
Notably, there are options to set up your car export business:
- Buying a franchise — You’ll benefit from the reputation of the existing brand, so you don’t need any more branding. Setup fees will be low, and you may need just about $5,000 to purchase a franchise.
- Starting independently — While you may spend nothing short of $20,000 to start an independent car export business, you have full control and flexibility.
- Partner with an expert — You can partner with an expert who has already established themselves as a successful exporter and take advantage of their wealth of knowledge and network.
Most of the work involved in starting an export business is fulfilling legal requirements. Of course, you’d be transacting internationally, so you want to ensure every activity conforms to international trade laws and customs regulations.
Here are the fundamentals you must address:
If you intend to set the business as a corporation or partnership, you may need to obtain a state license. However, that wouldn’t be mandatory if you do not make direct sales in that state (i.e. if the cars are all shipped out). Regardless, it would help if you remain up-to-date on the car exportation guidelines that the US State Department often publishes.
One of the most critical steps in car exportation is filing forms with customs. You must complete a Shipper’s Export Declaration (SED) for every shipment. Given the forms, duties, taxes, and other formalities, it’s often beneficial to work with a customs broker. They can help ease the burden of border-crossing to allow you to focus on the business itself.
You would need Foreign Trade Zones (FTZs) and temporary Import Exemption (TIBE) to start a car export business in the US. The foreign trade zone license allows you to keep cars in an FTZ facility near you until they’re ready for shipping.
If you own a warehouse approved by Customs, you wouldn’t need an export license.
Other documents you may need (not always necessary) include:
- Temporary importation bond exemption
- Consular invoices (if you export second-hand vehicles).
Ensure you contact the Customs authority to know what documents are necessary and optional.
After completing all setup and legal requirements, it’s time to focus on your market.
Find the best countries to target that are most profitable. Also, consider the kind of vehicles you want to sell. It’s best to go for best-selling cars while starting your auto exportation business. It would help if you targeted wholesalers and dealerships in those countries.
Customers will often ask about your vehicles, not just the brand, but also the model, year of manufacturer, engine, mileage, etc. If you can satisfy the needs and questions of your target customer, you are more likely to make a sale.
Make your car exportation business legal by completing the US Department of State SNAP-R form. The department will instruct you on obtaining your company’s tax identification number for tax purposes.
You wouldn’t always have to buy a car before reselling/exporting. Instead, you could make your profit based on a commission structure. In that case, you will be closing deals for other vendors. Your commission may be around 10% of each deal you close, but ensure it covers your labor/material cost plus profit. If you have records and figures of past deals, use them as a guide for future ones. You can add packaging and shipping fees on top of the commission. You can also make additional profits by keeping track of the exchange rate of other currencies and keeping money in their local banks.
Car exportation is a risky business as anything can happen at any time, so you need insurance to protect you in times of trouble. Different insurance policies exist, and limited liability company insurance is a good place to start. You will also need a worker’s compensation insurance policy if you have employees.
Vehicle exportation is highly lucrative, but only when done right. In the beginning, it demands a lot of effort and patience; you may even get overwhelmed. Having experts, third parties, and consultants guiding you will be of immense help.