About two-thirds of last year's gray-market vehicles went to Canada, says Brian Osler, president of the North American Automobile Trade Association, an organization of dealers involved in importing and exporting.
Other hot markets are China, Russia, Saudi Arabia and South America. The greatest demand, say dealers and exporters, is for European-brand luxury vehicles.
Nearly all automakers forbid U.S. dealers to sell new vehicles for export, citing warranty concerns and their own sales plans. Automakers work with customs officials to track unauthorized exports, using vehicle identification numbers to determine which dealerships sold the vehicles.
Manufacturers' penalties include charge-backs against dealerships' retail and fleet incentives and holdback allowances. Last month, Mercedes raised the “administrative fee” it charges dealers for unauthorized exports by 20 percent, to $300 per vehicle.
Dealers say other automakers are stiffening export restrictions.
Jack Fitzgerald owns 13 dealerships, most of them in the Washington, D.C. area, that sell 19 brands. Fitzgerald notes that Chrysler LLC now charges an export penalty of $3,000 a vehicle. Fitzgerald says his five dealerships that sell Chrysler brands have not had to pay penalties.
Mike Charapp, a lawyer in suburban Washington who represents dealers, says several clients are appealing factory charges and other penalties — some amounting to hundreds of thousands of dollars.
“It's a big problem,” he says. “With the dollar weak, there is a lot of money to be made by these brokers.”
One exporter, who asked not to be named because he fears factory retribution, says he provides a legal service.
“A Mercedes-Benz in China sells for four times what it costs in the U.S.,” he says. “We have people from Europe buying European cars in the U.S. Because of the value of the euro vs. the dollar, it is like getting 50 percent off.”
But because of the factory restrictions, he says, he expects to export no more than seven or eight new vehicles this year, down from as many as 100 in his best years.
The exporter concedes that he sometimes resorts to “subterfuge” to buy vehicles from dealers because of factory prohibitions against exports.
“What if all of the BMW dealers in Chicago decided it was OK to export new vehicles?” he says. “The factory couldn't do anything about it.”
The American Automotive Shippers Association Inc., a group of 37 exporters, is considering a trade-restraint lawsuit against automakers over export restrictions, says association President Max Ruefenacht, an exporter in Rockaway, N.J.