Pyongyang car, cars
A car on the streets of Pyongyang. (Lawrence Wang, Creative Commons, Flickr)

North Korea’s smuggling of used cars from China in Yanggang Province’s city of Hyesan has been put on hold since the start of June, Daily NK has learned.

Speaking on condition of anonymity, a source in the province told Daily NK last Wednesday that the smuggling was temporarily suspended “as the number of cars parked on the road kept going up because it took too long to release them for sale.”

In fact, according to the source, even though used car smuggling was suspended at the start of this month, used cars can still be seen lined up in plazas in front of Hyesan’s arts theater, cinema, and Hyesan Hotel.

“The cars can be sold after they’ve been screened and approved by the Ministry of Social Security and Cabinet,” the source said. “Agents with the Ministry of Social Security record the car number and registration, while officials with the Cabinet screen and approve the car’s make, color, and affiliated agency.”

However, distributing imported cars is a problem because it usually takes more than 10 days to get sales approval. As a result, people who imported the cars are upset because they’re risking going into debt as interest payments mount.

“These people smuggle used cars in partnership with trading companies they know. After they receive a trading license in the company’s name and import the cars, they sell the vehicles and share the profits with the company,” the source said.

“However, as it costs a lot of money to import each vehicle, they borrow money on interest. But since the cars haven’t been sold yet, they’re on the verge of going into the red.”

The used cars imported into North Korea usually cost about RMB 45,000 in China. Imports must also factor in the cost of the trading licenses, which are around RMB 30,000 per vehicle, and the personnel costs of transporting the car from China to North Korea, which is RMB 2,500. Taken altogether, it costs about RMB 77,500 to import a single used car. As of June 17, RMB 1,000 is equal to around USD 137.

The sellers of these imported used cars add another RMB 5,000 to 7,000 to the price of the vehicles, giving them a sticker price of between RMB 82,500 to 84,500.

It costs over RMB 150,000 to 200,000 to import two or three cars at a single time, so some people borrow money at a single-day interest rate of RMB 100 per every RMB 10,000.

However, because it takes over half a month to actually sell a vehicle after screening and approval, the importer would have to pay RMB 10,000 in interest for a RMB 100,000 loan. With so little left over after the interest payments are made, some importers even take losses. Importers are unhappy about this situation, the source said.

“People who imported the used cars paid for the trading license, expecting it to take about five days to register the vehicles. They had no idea it would take so long. They are pretty frustrated, saying they now need about RMB 300,000 to do the job. Otherwise, [importing used cars is too expensive] except for the state or the rich.”

He added: “Once all the used cars parked on the road are released, state-led smuggling will restart, but given various circumstances, the price of used cars is expected to climb.”

Daily NK works with a network of sources living in North Korea, China, and elsewhere. Their identities remain anonymous for security reasons. For more information about Daily NK’s network of reporting partners and information-gathering activities, please visit our FAQ page here.

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