Grey import vehicle

Grey import vehicles are new or used motor vehicles and motorcycles legally imported from another country through channels other than the maker's official distribution system or a third-party channel officially authorized by the manufacturer. The synonymous term parallel import is sometimes substituted. Car makers frequently arbitrage markets, setting the price according to local market conditions so the same vehicle will have different real prices in different territories. Grey import vehicles circumvent this profit-maximization strategy. Car makers and local distributors sometimes regard grey imports as a threat to their network of franchised dealerships, but independent distributors do not since more cars of an odd brand bring in money from service and spare parts. In order for the arbitrage to work, there must be some means to reduce, eliminate, or reverse whatever savings could be achieved by purchasing the car in the lower-priced territory. Examples of such barriers include regulations preventing import or requiring costly vehicle modifications. In some countries, such as Vietnam, the import of grey-market vehicles has largely been banned. Grey imports are generally used vehicles, although some are new, particularly in Europe where the European Union tacitly approves grey imports from other EU countries. In 1998, the European Commission fined Volkswagen for attempting to prevent prospective buyers from Germany and Austria from going to Italy to buy new VWs at lower pre-tax prices; pre-tax price is lower in Italy, as in Denmark, due to higher tax on cars. It is even possible for car buyers in the United Kingdom to buy right-hand drive cars in EU countries with right-hand traffic where left-hand drive cars are the norm. Japanese used vehicle exporting is a large global business, as rigorous road tests and high depreciation make such vehicles worth very little (in Japan) after six years, and strict environmental laws make vehicle disposal expensive.