Toyota has made the tough decision to leave the Russian market. Supply chain disruptions and financial sanctions have persisted in the wake of Russia’s invasion of Ukraine. Additionally, Mazda has started talks with Russian partners to wind down manufacturing there. Amidst a world at odds as a result of the Russian-Ukrainian conflict and the Sino-US confrontation, it is crucial to revise the production network predicated on globalization’s growth. On September 23rd, Toyota announced it would no longer manufacture or sell vehicles in Russia. However, it would continue to provide warranty and maintenance services for vehicles already sold in the country. On the same day, Toyota’s executive chairman Tian Zhun told the media that “the local Russian legal person will be liquidated without a transfer or sale.”
In 2021, Toyota plans to manufacture 80,000 vehicles in Russia, with sales of 11,000. Local production in St. Petersburg, Russia began in 2007, and by 2021, the company was making a variety of vehicles, including the sport utility vehicle “RAV4”. Toyota cited issues sourcing components and paying workers as justification for leaving the Russian market. Because of a lack of available replacement components, the Russian plant cannot resume manufacturing. Toyota’s Russian affiliate ceased production and the import of new vehicles, and the company reported almost no revenue. Wages must be paid in rubles held in Russia at this time. It has decided to withdraw from the Russian business, despite the fact that the available rubles will not be depleted immediately due to the increase in employee severance benefits and the funding of reemployment support. Toyota likely also considered how maintaining operations in Russia would affect the company’s global reputation. An internal Toyota spokesperson soon after Russia’s attack on Ukraine warned 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 part of our efforts to promote business through separate investment and localization amid tensions between China and the United States. Toyota has not made any definitive plans for its new plant in Myanmar, despite the country’s imminent launch. This comes as a surprise given the recent military coup there, which has caused many foreign companies to flee the country. Russia’s global isolation has been exacerbated by Russia’s attack on Ukraine, while Toyota has traditionally kept politics and business separate. Because it was the first Japanese automaker to announce its withdrawal from the Russian market, Toyota has found it challenging to maintain its previous attitude. Toyota’s performance hardly budged after the Russian withdrawal. Toyota’s annual sales of new automobiles in Russia are approximately 110,000 vehicles, which is less than 1% of the total.
The procurement system, on the other hand, must be rebuilt immediately. A subsidiary of Toyota, Toyota Boshoku, which made seats for Toyota vehicles, was also initially present in the Russian market but was eventually forced to leave. Despite rumors to the contrary, Toyota Boshoku has not yet announced its policy as of September 24. Additionally, Toyota stated, “We will communicate with each component manufacturer individually and consider providing support in terms of withdrawing from Russia.” The Toyota plant in Russia uses components imported from Europe. Toyota’s direct suppliers, including those for export to Russia, have stopped supplying parts, necessitating an adjustment to “the production system” (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.” Despite the growing demand for electric vehicles (EVs), Nissan and Honda are cutting back on output in Europe. If other Japanese automakers follow Toyota’s lead and abandon the Russian market, it could have a domino effect on their efforts to reestablish a production network in Europe. Major automakers like Toyota and others with plants in Russia are also having trouble. The joint venture plant of the local Russian automaker Sollers announced on September 24 that they are in talks with Mazda to end production of Mazda vehicles. MarkLines, a market research firm, estimates that 29,000 automobiles, including the Sollers portion, will be manufactured in 2021. While the plant is closed, Mazda will continue with its plans. However, as of yet, there has been no decision to cease operations. Additionally, Nissan decided to keep the St. Petersburg assembly plant closed until the end of December, despite the fact that the shutdown had been scheduled to end at the end of September. A partnership between Mitsubishi and European automaker Stellantis in Russia has also been halted. Also leaving Russia is the French automaker Renault. After Russia’s invasion of Ukraine, over a thousand companies publicly stated they would either cease doing business with Russia or significantly reduce their presence there, according to data compiled by Yale University in the United States. Although 711 businesses have temporarily ceased operations, only 113 have completely exited the Russian market, according to a survey conducted by the Ukrainian think tank KSE Research Institute.