The export car business is a very demandable business and in the coming years, this industry will grow rapidly. Cars don’t just drive the roads they also play a significant role in the economy. Statistics show in 2015, the US imported more than $1.25 billion in used passenger vehicles and exported nearly $5 billion. This is a huge amount and you can also be a part of this big industry by running the export cars business. So if you are wondering how you can start your export car business and run it successfully then keep reading this article. Here I have shared some information that will give you an overview of this business.
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- 1 Types Of Import/Export Businesses
- 2 Startup Costs For Export Car Business
- 3 Incorporating And Forming An LLC
- 4 Get Business Insurance
- 5 Pick The Business Model
Types Of Import/Export Businesses
Before we dig into the car export business we should know the types of import/export business. There are three basic types of import/export businesses. They are:
Export Management Company: An export management company (EMC) usually handles operations for a domestic company. It helps companies that want to sell their product overseas. The EMC takes care of everything related to exporting including hiring distributors, creating marketing materials, and handling shipping logistics.
Export Trading Company: An export trading company (ETC) identifies what foreign buyers are looking for and on what product the buyers are willing to spend money on. Then the ETC looks for domestic sources that are willing to export.
Import/Export Merchant: Import/export merchant works as free agent. Usually, an import/export merchant buys merchandise from a manufacturer and then resells that merchandise around the world.
Startup Costs For Export Car Business
Export car business requires little upfront cost. You will require fixed capital for purchasing office space, equipment, furniture, etc. Moreover, you will need funds for initial legal fees for licenses, permits, etc. You will also need money for operating day-to-day business. The expenses include salaries, office supplies, utility expenses, and so on.
Identify The Market And Target Customer
Now that you have decided to run an export car business and figure out the startup costs, it’s time for you to narrow the market and target customers. By narrowing the market you can concentrate on a market you can serve best. So spend some time and research about the market and the customers. You can think about –
1. Customers you want to serve
2. Countries and cities you’ll target
3. Types of vehicles you’ll offer
Types Of Vehicles
You have to decide what types of vehicles you want to export. There are different types of vehicles available. They are:
1. Light-duty motor vehicles: Passenger cars and trucks
2. Motorcycles and scooters: Including lithium-ion batteries, lead-acid batteries, and fuel cells
3. Recreational vehicles: Dirt bikes, ATVs, and snowmobiles
4. Heavy-duty motor vehicles: Commercial trucks and buses
Choose The Target Country
For export business picking the right target, the country is very important. To narrow down the countries you can think of the below topics:
1. Do you speak a foreign language?
2. Do you have connections abroad?
3. Have you lived overseas before?
4. Have you traveled extensively to a particular country?
5. Do you love the culture of a certain country and know a lot about it?
Once you have narrowed down the targeted countries, research every country’s requirements for operating business. You should check the tariffs, registration, and other documents.
Top 15 Vehicle Exporters Of The World
1. Germany: US$142.3 billion
2. Japan: $98 billion
3. United States: $56.2 billion
4. Mexico: $49.7 billion
5. Canada: $40.7 billion
6. South Korea: $40.5 billion
7. Belgium: $38.6 billion
8. United Kingdom: $38.6 billion
9. Spain: $35 billion
10. Slovakia: $23.9 billion
11. France: $23.6 billion
12. Czech Republic: $22.6 billion
13. Italy: $15 billion
14. Turkey: $11.9 billion
15. Sweden: $11.86 billion
Top 15 Vehicle Importers Of The World
1. United States: US$179.5 billion
2. Germany: $70.5 billion
3. China: $47.1 billion
4. United Kingdom: $43.8 billion
5. Belgium: $39.9 billion
6. France: $38.5 billion
7. Italy: $30.8 billion
8. Canada: $28.4 billion
9. Spain: $21.3 billion
10. Netherlands: $16.6 billion
11. Australia: $14.9 billion
12. Japan: $12.1 billion
13. South Korea: $11.1 billion
14. Switzerland: $11 billion
15. Saudi Arabia: $10.9 billion
Register Your Export Car Business
After forming your export car business, you have to register it from the US Department of State’s SNAP-R company registration. After you submit your information, the Department of State will send you an email that will contain instructions about obtaining a company identification number (CIN). CIN is very important because it is used for tax purposes and for registering with the US Department of Commerce.
Export Car Business License
Usually, the US Customs and Border Protection (CBP) doesn’t require a license to import or export vehicles to and from the United States. However, there are other government agencies or departments that might require a license.
Incorporating And Forming An LLC
For the export car business, you don’t have to incorporate and form an LLC. But creating an LLC can provide you some important advantages that include:
|Separation of personal and business assets||Creating a corporation or a limited liability company (LLC) can help you protect your personal assets. For example, you’ll have less personal liability for business debts|
|Expense deduction||Through a corporation or LLC, you can deduct business expenses before income is forwarded to you|
|Enhanced credibility||Clients often prefer working with incorporated businesses, seeing them as more legitimate|
Get Business Insurance
For the export car business, insurance is very important. Along with licenses and permits, insurance is required to operate your business safely and lawfully. Business insurance protects your company’s financial wellbeing in case there is an accident or in the event of a covered loss. There are various types of insurance policies available for different types of businesses. If you are not sure which insurance to take then you can begin with General Liability Insurance. This is a very common coverage for the export car business. You will also need Workers’ Compensation Insurance if your business has employees. Many states in the USA require the business owner to carry Workers’ Compensation Coverage.
Pick The Business Model
This is a crucial part of the export car business. You have to pick a business model from the “commission model” and “retainer model.” If you think cars will be easy to sell then the commission model will be a wise choice. However, if the sale is very slow then you have to think of the “retainer model.” The retainer model ensures that you’ll be paid even in the downtime. So, do a deep research of your business, customers, and cars, then pick a business model that best suits everything.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.