Sophisticated Smugglers Rankle Luxury Carmakers


Robb Young | June 06, 2011

Our bi-weekly analysis of the must-read luxury news headlines

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Unless you’re a specialist in the auto sector’s complex distribution network, you’d be forgiven for thinking that large scale luxury car smuggling was confined to the most impoverished, war-torn territories where civil unrest simply prohibits the establishment of legitimate dealers and approved vendors. Albania, for instance, has become a byword for this sort of illicit trade over the past couple of decades.

So synonymous had the country become as a destination for smuggled luxury vehicles that earlier this year, Top Gear, a popular British television programme about high-octane cars, featured a tongue-in-cheek episode in which the presenters brought three luxury models (a Rolls-Royce Ghost, Mercedes-Benz S-Class and a Bentley Mulsanne) to the country’s capital, Tirana, to see which would be ‘most suitable for Albanian mafia bosses’.

Back in 1999, when the outside world first woke up to the seriousness of such high-end contraband, the Los Angeles Times ran a story outlining the social ills that lie behind the country’s unfortunate reputation for such illegal imports.

“For those perplexed by the preponderance of sleek Mercedes-Benz sedans on the potholed roads of a country that is, by a long shot, the poorest in Europe, there is a simple explanation: Most of them are stolen. The lawlessness that has prevailed in Albania since hard-line communism was overthrown…has bonded swimmingly with the ingenuity instilled by decades of deprivation to produce a thriving automobile market in a nation where almost no one can afford a legal purchase,” wrote the author.

“ A booming black market may become serious cause for concern among luxury carmakers in attractive, emerging markets ”

Because second-hand cars were being stolen off the streets of Western Europe and North America and sent via clandestine networks to countries like Albania, tt was largely the insurance companies in mature markets which were bearing the brunt of the expense of such organised crime syndicates. And the pattern has been much the same in other parts of the world since.

Only last month, Arab News revealed a twist on the phenomenon with the headline: “Luxury cars with Libyan plates are becoming a common sight in the Gaza Strip, a surprising side-effect of the unrest in the north African country.”

Like Albania, at present, Gaza is hardly an attractive market for luxury carmakers selling new vehicles at full price via legitimate channels, so the black market is not a substantial threat. But more recent news stories suggest that they may now have cause for concern.

Not only is there evidence of increased smuggling activity in frontier markets with pockets of potential (like a recent story from the AFP about Algeria) but smuggling rings are becoming increasingly sophisticated in important emerging markets too.

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The big revelation of the week came from a feature in The Daily Telegraph about “a multi-million [dollar] scam to sell diplomatic vehicles to India’s rich and famous at cut-price rates by avoiding hefty import duties.”

Dean Nelson reported from New Dehli that “after a tax investigation exposed the alleged smuggling operation, nervous members of the super-rich have scrambled to avoid arrest by abandoning cars, including Bentleys and Aston Martins on the streets of New Delhi. More than 40 cars are now impounded in a government car park.”

What sets this ring apart from most of those prevalant in previous decades is the level of sophistication used on all sides of the racket to both deal and conceal. Perhaps more worryingly for luxury automakers, is that many of the targets of the smuggled vehicles were extremely high-profile individuals who could be attractive genuine clients or possibly even brand ambassadors. International diplomats residing the Indian capital, several Bollywood actors, cricket players and athletes, celebrities, civil servants and big businessmen were among those who purchased the estimated 300-400 smuggled cars.

And India is of course not alone. In the past few weeks, similar headlines hit the media in other lucrative emerging markets like Malaysia and the Philippines.

Such stories have begun to cause some in the industry to call for action. With makers of fashion, accessories and other small luxury goods increasingly united in their plight over counterfeiting, some analysts now wonder whether their luxury peers in the auto sector may not be doing enough to collectively combat the illicit trade in smuggled cars.

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