Dollar drives used-car exports
The falling US dollar is fuelling an export bonanza in the Hong Kong used-car market, enabling buyers in Britain, New Zealand and Australia to pick classic sports cars and high-end late models at discount prices.
Export agents say currency gains in the last six to 12 months have led to an increase in purchasing power for offshore buyers of up to 40 per cent.
'It started to get busy in February,' says David Neil, owner of Expat Motor Services in Sai Kung. Volume of business is up 50 per cent this year, he says. 'Getting hold of the cars is the problem, not selling them.'
Six weeks ago Mr Neil sold a 1987 Porsche 911 Carrera Coupe to a buyer in Australia who saw the vehicle advertised on the Internet. Shipping and import taxes should add about 30 per cent to the vehicle's HK$125,000 purchase price, bringing the total cost to roughly A$28,000 (HK$160,788). That compares favourably to the A$40,000 sticker price of an equivalent model Porsche in Sydney or Melbourne, Mr Neil says.
As an added bonus, Hong Kong vehicles normally have low mileage, few rust problems, and often come with good service histories.
Predicting the resale value of Hong Kong cars in foreign markets such as Australia is more of an art than a science, due in part to differences in condition of individual vehicles, brand, and model preference. This year, the best punts, according to one dealer, are Mercedes Benz sports cars or E-series sedans between the model years 1993 to 1996.
As a general rule of thumb, exporters of classic sports and luxury vehicles have exploited the price discrepancy between Hong Kong's relatively weak second-hand market for used prestige cars and the robust markets in Australia and New Zealand, not to mention Britain.
One dealer estimated a 1992 Mercedes Benz 500 would fetch about ?0,000 (HK$273,850) in Britain. An equivalent vehicle could be purchased in Hong Kong these days for HK$150,000, a saving of roughly ?0,000 before shipping and taxes.
In recent years relatively few people have been plying the export trade to these regions, Mr Neil says, apart from a handful of commercial airline pilots who ring him to arrange a few deals a year. But with almost every non-US currency swinging into the driver's seat during the last year, that appears to be changing.
'There was always some interest, but while the currency was weaker the figures were marginal,' Mr Neil says. 'The appreciation in the currency is where the people are making their money now, because cars are effectively 30 per cent cheaper.'
During the past 24 months the US dollar and its Hong Kong pegged cousin have slid 50, 42 and 20 per cent against the New Zealand dollar, Australian dollar and British pound respectively.
Experts say buyers should keep an eye on import quotas and hidden tariffs that can add thousands to the costs of shipping a vehicle. Australia has some of the most complex rules. For vehicles under the age of 15 years, Australians living abroad are permitted to privately import one per year. In order to meet customs requirements, the owner must have had the vehicle registered in his name for one year in a road-insured condition.
For vehicles 15 year or older, there are no restrictions on the period of ownership, but an individual may import a maximum of six vehicles per year. All vehicles from Hong Kong are subject to shipping charges (estimated at HK$15,000 per vehicle), an import duty of 15 per cent (on original purchase price minus depreciation), goods and services tax of 10 per cent (on the landed cost which include purchase price plus shipping and agent fees), as well as fees for compliance and roadworthiness checks (estimated at HK$5,000). Vehicles with an original purchase price of more than A$57,000 (HK$327,318) are subject to an additional luxury tax of 30 per cent.
British residents repatriating their assets have it comparatively easy. They are required to demonstrate they have owned the car for more than six months, and lived outside Britain for more than a year. Import duties are applied only if the vehicle is sold within one year, one dealer says.
'It is not as commercially viable as doing it through Australia and the car would definitely be worth a lot less, unless you find a car with a full service history and that is difficult to get,' Mr Neil says.
Because of the import restrictions, buyers in Australia tend to focus on older model luxury cars, a bracket that often falls below the all-important A$57,000 luxury tax threshold. However, surging demand has made it difficult to source a well-cared-for vehicle in the 1988 and 1989 model years.
Recent amendments to Australian import rules saw the definition of a vehicle's year or make rolled back to the month of manufacture, a change that can shave a year off a vehicle's age.
Despite Hong Kong's once-glutted market of used luxury vehicles, and reputation as the best used Porsche market in Asia, seven years of grinding recession since the onset of the financial crisis have forced even the territory's wealthy tycoons to scale-back their spending and reduced the used vehicle turnover.
Second-hand dealers also say there simply are not that many late-1980s luxury models, because the economy was weaker during that era.
Despite the shortage of older vehicles, a quick walkabout in the Wan Chai Automall, a sprawling underground parking complex next to the Grand Hyatt Hotel, revealed plenty of younger luxury vehicles at seemingly knock-down prices. A case in point: a burgundy 1997 Maserati Ghibli with leather interior, 27,000 km, and a sticker price of HK$138,000.
A few rows over, a 2000 Nissan Pajero 4-wheel drive carried a sticker price of HK$218,000. The vehicle was said to belong to a factory owner who spent a lot of time in China, hence the 9,200 km on the odometer.
Dealers caution that buying and holding any car carries the risk of fluctuating brand preference. Australian automotive enthusiast Tim Headly says some buyers caught the pinch last year when buying BMW 320is in the 94 to 95 model year.
During the past 12 months the value of these vehicles has fallen about 50 per cent to an average HK$60,000.
'It's not like you can just waltz out the door, buy a car and in a year ship it home and make money,' he says. 'You have to be really careful about what you buy and what you need to do to the vehicle to make it roadworthy.
'For people who know what they are doing, Hong Kong is becoming a really good place to look for used vehicles,' he says.