Visit Chile, one of the five countries in South America: The next billion-dollar track for used car exports

Do you think Chile is the end? No, it's just a door.

If you tell most new used car exporters that I want to open the Chilean market, they will most likely pull out the Ministry of Commerce's foreign trade guide and tell you that Chile prohibits the import of used cars, forget it.

This is only half true.

Chile has indeed blocked the way for ordinary citizens to import used cars since 2017. But the same law leaves a back door to one place: the Iquique Free Trade Zone (ZOFRI).

It took the Japanese 30 years to dump millions of used cars into the heart of South America through this back door.

Now it's the turn of the China.

1. A neglected back door: Iquique ZOFRI

Open Google Maps and pull your eyes to the middle section of the west coast of South America. You will see Iquique, a small city embedded in the desert of northern Chile.

There are no cars in this place and the population is less than 200,000. But it has the largest free trade zone in South America, covering an area of 240 hectares and having more than 2000 companies settled in. After the port is expanded in 2024, it can dock giant ships with 9000 TEUs.

ZOFRI's core policy has only four words: tax exemption.

When imported goods enter ZOFRI, the tariff is zero and the value-added tax is zero. Any environmental protection standards and safety certifications are not applicable. Only when goods leave ZOFRI and enter other parts of mainland Chile do they need to pay taxes and meet regulations.

As a result, in the past thirty years, this route has been thoroughly understood by the Japanese:

Japanese auction house collection → shipment to Dubai → transshipment to Iquique → storage in ZOFRI warehouse → overland shipment to Bolivia, Peru, Paraguay for sale.

Chileans cannot buy used cars themselves, but used car buyers across inland South America rely on Iquique to survive.

This is the logic of opportunity for China players: Chile is not a market, ZOFRI is a channel.

2. The dark line behind the 28% market share

Let's first look at a set of data to calm down the alarm.

From January to February 2025, the share of China automobile brands in Chile's new car market has surged to 28%-29.7%.

Great Wall, Chang 'an, Chery, BYD, Geely, Futian-there are more China brands Chileans can name than you can carry. Great Wall's pickup truck Poer once overtook Mitsubishi L200 and Ford Ranger in Chile, becoming the number one sales leader in the market segment.

What does this have to do with used cars? It matters too much.

Brand recognition is the hardest pass for used car exports.

A Bolivian buyer stood in the used car showroom in Iquique, facing a 3-year-old Haval H6 and an 8-year-old Toyota RAV4, priced at about the same price. Who did he choose?

If he was completely unfamiliar with the Haval brand, he would choose Toyota-even if Toyota was older and lower-profile. But it's different now. Haval has been sold in Chile for five years and can be seen everywhere in the streets. 4S stores and parts supply chains have been rolled out. After the brand trust was established, the cost of trust in used car transactions was reduced to a minimum.

To put it bluntly: the success of new cars of China brands in Chile is the credit endorsement of China's second-hand car exports.

3. Left rudder: A wall that the Japanese have hit for 30 years

Japan is the big brother in the used car export industry, exporting more than 1.2 million vehicles a year, spreading to more than 200 countries around the world.

But in the South American market, the Japanese have one problem that they can never avoid: right-hand steering cars.

More than 70% of vehicles in Japan have right-hand rudder. All countries in South America are left-hand. If Japanese used car dealers want to sell in South America, they must specialize in purchasing left-hand rudder export models. These cars have small stock at Japanese auctions and high premiums, and supply is always stuck.

What about China? All left rudder, unlimited.

This is a structural competitive advantage that cannot be smoothed out by harder work.

While Japanese players were still snatching the rare left-rudder Prados in the auction house, China players could already place orders in batches to choose Haval H6 on melon seeds and Youxin. The degree of freedom on the supply side determines the ceiling of scale.

5. New energy: cards that the Japanese cannot play

The Chilean government announced in 2021 that it will ban the sale of new fuel vehicles starting in 2035.

This is one of the most radical electrification commitments in South America. Chile is the world's second largest producer of lithium mines and has natural power to push electric vehicles. However, Chile does not produce cars locally. To complete the electrification transformation, it can only rely on imports.

Here's the problem: Middle American classes can't afford a $40,000 Tesla or wait for the long delivery cycle of the new car. Second-hand electric vehicles are the only realistic transition plan.

Where is the world's largest supply pool of used electric vehicles? China

BYD Qin Plus, BYD Yuan Plus, Wuling Hongguang Mini EV, Nezha V, Zero Run T03-these models have an alarming inflow and outflow in the China market, car owners frequently exchange purchases, and the second-hand price of three-year-old cars has fallen to a very competitive level. A 3-year-old BYD Yuan Plus may sell for RMB 80,000 to RMB 90,000 in China and easily double in South America.

The most important thing: the Japanese are completely absent from this track.  The Toyota bZ4X is too small, the Nissan Leaf is too old, and Honda Electric has almost no presence. Electric cars in Europe are too expensive, and electric cars in the United States cannot enter South America.

The export of new energy used cars to South America is a window for the right time, place and people. Can you catch it?

Source: Xiong Yu, digital automobile export

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