Chapter 47 - Importing second-hand luxury cars
(Sponsored by darkmeepking)
The next day, Kirilenko and his team went to Tai Hua Trading Company. Kirilenko and Feng Yu signed a trade agreement. The agreement states the terms and responsibilities of both sides, such as the Soviet Union side is in charge of the transportation of goods from Moscow to Bing City, payment terms, delivery time, etc. However, there was no mention of the type of goods in the agreement.
“Brother Ki, what do you all want this time?”
“Do you have any good recommendation?” Kirilenko asked casually.
Feng Yu snapped his fingers and Wu Zhigang entered the room, holding two Wind and Rain electric fans and placed on the table.
“Have a look. This is currently the most popular electric fan in China. Wind and Rain Electric fans. Safe, light, beautiful, and economical. I purposely kept some for you.” Feng Yu said.
The group of Soviets’ eyes grew big when they saw the electric fan can be clipped on tables, chairs, cabinets, etc. They even gasped in surprise when Feng Yu put his fingers into the fan blades and didn’t injure himself.
The Soviet Union as just as Feng Yu guessed. They do produce electric fans but they were the same as China. They produce those metal, expensive, bulky, noisy and poorly designed electric fans.
14 to 15 Rubles a unit? It's too cheap! Kirilenko immediately ordered 20,000 units! If it wasn’t because they don't have enough money, they would want more.
The rest of the goods were mainly food products, such as ham sausage, canned goods, sweets, Jianlibao drinks, and the rest were textiles products.
The Soviet Union is one of the world’s leaders in heavy industry but their light industry was now being overtaken by China.
Feng Yu calculated the total price. He added 5% more to the wholesale price of the electric fans and with the fans, the total added up to nearly 600,000 Rubles. Kirilenko and his partners do not have enough money.
But Feng Yu waved his hand: “It is just 100,000 Rubles. I believe you. If you still have train carriages, I can even send you more goods! This trade can even don’t need to use so much money. You can just deliver the things I want to at the same time to offset the differences. We can barter!”
The Soviets looked at each other.
Based on their past experiences, they should be paying Feng Yu the full payment first before Feng Yu load and deliver the goods. After they received the goods, they will then load the goods Feng Yu wanted and deliver to Bing City. At the same time, Feng Yu would need transfer the full payments to them before they deliver the goods.
But what Feng Yu just said was to ask them to ship over the goods he wanted from the Soviet Union, as payment for the differences. But, they are in charge of the transportation and Feng Yu still got to pay for part of the transportation charges. Feng Yu is not afraid that they will con him?
Feng Yu might not trust others, but he still trusted Kirilenko. As long as Kirilenko still want to make money, Feng Yu is an important business partner.
Sure enough, Kirilenko agreed on behalf of the rest. In the Soviet Union, they were about to use 20% to 30% down payment to get the goods first. The balance can be paid off two months later. The Soviets immediately start to discuss what other goods they want.
When they had ordered 1 million Rubles worth of goods, Kirilenko asked Feng Yu, what are the goods he wanted from the Soviet Union.
“Used cars. European made second-hand cars. As long as there are no problems with the vehicle’s performance and reasonably priced, I will buy everything you can find!” Feng Yu replied.
In that era, the tariffs for imported cars were very high. But for used cars, the tariffs were just like ordinary goods. It was very cheap compared to new cars. In China, there are many people who like imported cars but are unable to afford. They can only afford to buy domestic cars.
Feng Yu remembered in his previous life, there was a rich woman from Shanghai who made her fortune from importing second-hand luxury cars. She made a few billion within ten years. She had shipped the cars in via the sea and it took a long time for one shipment.
Feng Yu, on the other hand, will be importing these cars in via railway. The advantage of using rail was the fast and Bing City is very near to the borders. Feng Yu is very confident that he can quickly capture the Northeast market and gradually expand to the whole Northern region.
Kirilenko and his partners had a troubled look. They thought that Feng Yu will want a lot of things. With their family backgrounds, they can even help Feng Yu get contraband items. But, they did not expect Feng Yu only want second-hand European cars.
They do not have the supplies in their hands. If the quantity is big, it will be very troublesome. But they had already promised Feng Yu that they are able to get whatever he wanted.
“Feng, we are able to get second-hand cars for you but not in big quantity.” Kirilenko said embarrassedly.
Feng Yu raised his eyebrows and said: “Never mind. You just pick those luxury cars will do. Mercedes, BMW, Volga, or sports cars like Ferrari, Lamborghini, etc. I only want the expensive ones!”
If Kirilenko were to get some Lada or something, there won’t be any profits for Feng Yu.
European countries had lower tariffs between each other. The price difference for a BMW in the Soviet Union and China can be more than doubled. Feng Yu will bring in the second-hand luxury cars from the Soviet Union, and he will refurbish and repair these cars in China. He will then sell it off at double his cost price. He is not worried that there will be no market for these cars.
“Feng, besides second-hand cars, you want anything else? The machines produced in our country are very good and advance. You interested?” Kirilenko asked.
Feng Yu thought for a while and said: “Then I want some spare parts. For example, the spare parts for machines used in farming and spare parts for tractors. My side is still doing market research. I will let you know when I need other things.”
“No problem, we can easily get these things.” Kirilenko replied. They were all relieved. With their background and connections, they can easily get the spare parts for Feng Yu.
This time they only had 500,000 Rubles and bought 1 million Rubles worth of goods. Feng Yu had 1 million Rubles and asked for 1.5 million Rubles worth of goods.
This way of doing business, allowed both parties to buy more goods at a time. Transactions will still be recorded in the books but only a portion of the money will be deposited into their accounts.
After finalizing the details of their trade, Feng Yu asked curiously: “Every time you transport so many goods back, how do you pay the tax?”
The things Kirilenko bought every time were very miscellaneous and were piled together in the train carriage. Feng Yu was very curious about how Kirilenko pass customs and how he paid the taxes.
Kirilenko winked at Feng Yu and said: “Those goods are military supplies. We do not need to pay taxes!”
Fuck. These people were more shameless than he imagined. Transporting these goods back as military supplies and profit themselves.
Can Feng Yu also avoid taxes? Of course not! His company is a private enterprise and it is a must to pay taxes. Although the tariffs were much cheaper for second-hand cars than the new ones, they were still very expensive. Feng Yu had also inquired about tax rates for the metal spare parts and the taxes were not low too. How can he avoid taxes legally?
Feng Yu had thought of this problem when he wanted to do the second-hand luxury car business. He had discussed with the lawyer and concluded that he can import these cars as another item. Although he still has to pay taxes, the taxes will be 90% cheaper and legitimate.
Importing cars have to pay taxes but what about importing car parts or importing scrapped metal? If all the tires and seats were removed from the car, the car would be considered as scrapped metal. The tires and seats can then be imported as parts. Once the “scrapped metal” and “parts” arrived, they can be reassembled into a car.
The 50% or 60% tax will be lowered to below 20%. This is the loophole.
As long as he is able to do it 3 to 5 times, Feng Yu’s 1 million Rubles will become a few million or even more than 10 million! When that happens, he will have the funds to enter China’s financial market as one of the big boys.