The Scandal Shadowing Japan’s Used Car Giant: A Cautionary Tale in Corporate Governance

For years, Japanese used cars have been revered across Russia, Southeast Asia, and Africa. Their unmatched reputation combined with the semiconductor shortage last year propelled an unprecedented surge in the Japanese used car market. However, the market is now tainted by shocking revelations.

BIG MOTOR, Japan’s leading used car sales company, is alleged to have exaggerated damage on accident cars to fraudulently claim insurance money. By doing so, they not only increased insurance premiums for car owners but also duped insurance companies into settling additional claims. Ingenious methods, such as filling socks with golf balls to dent car exteriors or using screwdrivers to scratch surfaces, were employed to simulate accidental damages. Some of their workshops, pressured by ambitious monthly targets, even faked damages on undamaged cars, going to the lengths of fabricating paint expenses.

A third-party investigation revealed alarming statistics: of the 382 BIG MOTOR employees surveyed, over 40% admitted to participating in or witnessing such fraudulent acts. Moreover, 70% believed that the emphasis on escalating sales performance was the root cause. The company’s aggressive strategy became evident as the report highlighted a stringent target of 140,000 yen per car. Workshops that failed to meet this benchmark faced public reprimands and potential downgrades.

Surprisingly, official documentation of these revelations is absent. The report found over 1,275 cases of unjustified insurance claims, summing up to almost 50 million yen. BIG MOTOR’s unethical demands on insurance payouts inadvertently led to elevated premiums for car owners in subsequent years.

Government intervention seems overdue. Although the Minister of the Ministry of Land, Infrastructure, Transport, and Tourism, Tetsuo Saito, has called for an investigation, previous allegations against BIG MOTOR, including financial discrepancies dating back 18 years and issues reported in January 2022 about their fee systems, were largely ignored.

Furthermore, BIG MOTOR’s vehicle inspection services came under fire in 2022, with local transport departments administering administrative penalties. A glaring example was in June…