Toyota has made the decision to exit the Russian market. Supply chain disruptions and financial sanctions have persisted in the wake of Russia’s attack on Ukraine. Mazda is also in talks with Russian suppliers to wind down production there. Conflicts like the one between Russia and Ukraine, as well as the one between China and the United States, have polarized the world and made it necessary to revise the production network that was based on the furtherance of globalization. On September 23rd, Toyota announced that it would no longer manufacture or sell vehicles in Russia, though it would continue to provide warranty and maintenance services for customers who had previously purchased Toyota vehicles. In a press conference that same day, Toyota’s executive chairman Tian Zhun said, “the local Russian legal person will be liquidated without a transfer or sale.”
In 2021, Toyota plans to manufacture 80,000 automobiles in Russia and sell 110.000. St. Petersburg, Russia has been the site of local manufacturing since 2007, with products like the “RAV4” SUV coming off the assembly line in 2021. Toyota cited difficulties sourcing parts and paying workers as reasons for leaving Russia. Because of a lack of available replacement components, the Russian plant cannot resume manufacturing. In Russia, Toyota’s local subsidiary had almost no income after production and the import of new cars ceased. Wages must be paid in rubles held in Russia at this time. It has decided to withdraw from the Russian business, and while the available rubles won’t be depleted right away, they will be used to increase severance benefits for employees and fund reemployment support. It’s likely that Toyota also considered how a continued presence in Russia would weaken the company’s global brand. Following Russia’s invasion of Ukraine, a Toyota employee voiced concern that “doing business in Russia may not be understood by stakeholders (Stakeholders).”
Toyota’s global business strategy has included a policy of “equidistance diplomacy,” wherein the company avoids getting involved in politics. We are actively investing in batteries in both China and the United States, as well as promoting business through separate investment and localization, despite the competition between China and the United States. Toyota has not made any definitive statements about its plans for the new plant that will soon go into operation in Myanmar, where a military coup has occurred and foreign companies have retreated. Toyota has traditionally kept politics and business separate; however, Russia’s attack on Ukraine has increased the country’s international isolation. As the first Japanese automaker to announce its withdrawal from the Russian market, Toyota has found it challenging to maintain its previous attitude. Toyota’s business performance barely budged after the company pulled out of Russia. Although there will be some short-term costs, Toyota only sells about 110,000 new cars annually in Russia, which is less than 1% of the total.
Alternatively, it is crucial to restore the supply chain as soon as possible. Seat manufacturer Toyota Boshoku, which entered the Russian market alongside Toyota, was ultimately forced to leave the country. A policy announcement from Toyota Boshoku has not yet been made as of September 24; however, the company is rumored to have begun exit planning. To add, Toyota stated, “We will communicate with each component manufacturer individually and consider providing support in terms of withdrawing from Russia.” Toyota’s Russian assembly plant uses components imported from Europe. Because of this, “the production system needs to be adjusted,” as the component manufacturers who directly deal with Toyota, including those for export to Russia, no longer supply parts (the executive of the parts business). An official at a Toyota-owned parts manufacturer speculated that this “could lead to a restructuring of Toyota’s production system throughout Europe.” Nissan and Honda are continuing to cut production as the European market shifts to pure electric vehicles (EVs). With Toyota pulling out of the Russian market, it could have a domino-like impact on Japanese automakers rebuilding their European production network. Besides Toyota, major automakers with factories in Russia are also struggling. On September 24th, Mazda announced that the Japanese automaker is in talks to end production at the joint venture plant operated by the local Russian car company Sollers. MarkLines, a market research firm, estimates that 29,000 automobiles, including the Sollers portion, will be manufactured in 2021. Mazda will take further steps despite the plant shutdown. But no decision has been made so far to end sales and maintenance. Nissan has also decided to keep the St. Petersburg assembly plant closed until the end of the year (it had been scheduled to close at the end of September). Also put on hold is Mitsubishi’s Russian joint venture with Stellantis, a European automaker. Renault, a French automaker, also withdrew from the Russian market. After Russia’s invasion of Ukraine, over a thousand businesses reportedly said they would either stop doing business with Russia altogether or significantly reduce their involvement in the country, according to data compiled by Yale University in the United States. The Ukrainian think tank KSE Research Institute found that only 113 of 711 temporarily shut down businesses had actually left the Russian market.