04 Nov 2019
In February 2015, Chinese international student David Li was just months away from graduating with a bachelor’s degree from the University of British Columbia in Vancouver.
To celebrate, Li’s mother splurged on an epic graduation present: a C$160,000 (US$122,000) electric hybrid sports car, the BMW i8. With butterfly doors and a sleek spaceship-like design, the i8 was a young car lover’s dream.
After graduation, Li planned to return to Beijing with his new car. So he paid C$116,000 to Harry Piao, a businessman based in the Vancouver suburb of Richmond, to ship the i8 to Beijing.
Li never saw the car again.
Canadian court documents show the i8 made it to China, but ended up being held in an unrelated dispute between Piao and another businessman, Wang Qun, over another shipment of luxury cars.
According to the court judgment, Wang held the i8 to pressure Piao to make good on a previous delivery of cars that had been the wrong colour.
This April, a BC Supreme Court judge ordered Piao and Wang to pay Li C$329,000 and return the i8 to him. Wang is now appealing the decision.
Li’s beautiful car had become a casualty of a growing grey market in luxury cars shipped from British Columbia to China.
In Vancouver’s suburbs, straw buyers are paid a few thousand dollars to buy Mercedes, Land Rovers, Porsches and BMWs from dealerships and deliver them to resellers, who then ship them overseas where they command higher prices.
The trade isn’t illegal, but it does raise a host of red flags about the risk of money laundering and lost tax revenue for the Canadian government.
Court documents show that in some cases, straw buyers – people who buy the cars on behalf of the exporters – are at risk of being sued when the deals go wrong.
The luxury car grey market also exposes one more loophole in British Columbia’s patchy regulatory regime, which has already left the province’s casino and real estate sectors wide open to dirty money.
Starting in 2014, Vancouver began to be known as the “luxury car capital of Canada”.
Vehicle sales statistics from 2014 showed that luxury car sales in British Columbia were 41 per cent higher than the Canadian average, with local car dealers saying one factor in booming sales growth was the fact that many luxury cars cost much less in Canada than in Asia.
New dealerships opened to take advantage of the demand, and it became common to see McLarens, Ferraris and Lamborghinis on the streets of Vancouver.
In 2016, the province’s public auto insurer, ICBC, announced it would stop insuring cars worth over C$150,000 because of the huge cost to repair high-end cars damaged in crashes.
In 2017, a property development company in Richmond, BC proposed building a “condo” for car-owners to store their supercars in style.
But it’s now apparent that some of that explosive growth was being fuelled by the grey market: between 2014 and 2018, the underground export market grew by over 500 per cent, according to British Columbia’s Ministry of Finance.
In 2013, fewer than 100 grey market cars were exported outside BC. By 2014, that had risen to over 700, and by 2018, exports numbered 4,400.
American authorities have long been concerned about the luxury car grey market in the United States, but its existence in British Columbia was largely unknown until Peter German, a retired commissioner for the Royal Canadian Mounted Police, wrote about it in a June 2019 report commissioned by the BC government.
German’s ‘Dirty Money 2’ report tackled money laundering risks in real estate, luxury cars and horse racing, and was the sequel to an earlier report that focused on BC casinos.
By Jen St. Denis, South China Morning Post, 3 November 2019
Read more at South China Morning Post
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