Japanese automakers are turning away from Russia

Russia is losing popular Japanese cars: Nissan has announced a complete withdrawal from the market. Prior to this, the plant in the country was closed by Toyota, other automakers from Japan are also discussing the abandonment of production or curtailment of business. Analysts note that the loyalty of Russians to Japanese brands will still remain high, including through the supply of used cars.

Nissan, for a symbolic €1, transferred the Russian legal entity Nissan Manufacturing Rus LLC, along with production, to the Russian government (FSUE NAMI, subordinate to the Ministry of Industry and Trade). According to a similar scheme, Renault, Nissan’s partner in the global alliance and the owner of a 43% stake in the Japanese company, has already left the Russian market. In May, a French company for a ruble transferred to the Russian authorities a stake in AvtoVAZ with the right to buy back, and its plant in Moscow to the city authorities. Maintenance of Japanese brand cars, as well as Renault cars, will be transferred to AvtoVAZ.

Nissan will lose ¥100 billion due to exiting the market. Renault said that due to this, its net profit in the second half of the year will fall by €331 million. In 2021, Nissan Manufacturing Rus became profitable for the first time since 2012 (2.9 billion rubles).

Nissan will have an option to repurchase the asset within six years from the Russian authorities. However, if Nissan decides to exercise the option, the company will have to compensate NAMI for the new investment. According to Kommersant’s information, the Ministry of Industry and Trade offered a buyback scheme to all foreign concerns, and the companies themselves have little interest in this option.

In September, the closing of the plant in St. Petersburg announced another Japanese auto concern is Toyota, but there is no talk of a complete exit from the market, restructuring is planned, the company will continue to service cars. Japanese Mitsubishi, another member of the Renault-Nissan-Mitsubishi global alliance, has not yet made official statements about the fate of Russian assets. Mitsubishi has 30% in the PSMA Rus plant in Kaluga, the rest belongs to Stellantis. Mitsubishi is also considering pulling out of Russia, according to the Nikkei. The Russian office of the Mitsubishi trading company MMC Rus told Kommersant that they continue to work as before.

But in general, all Japanese concerns stand in the way of refusing to release in the Russian Federation. The interlocutor of “Kommersant” in the market notes that companies from Japan are “friendly and look at each other.” As Kommersant wrote on September 27, Sollers is discussing the purchase of Mazda’s share in their parity joint venture for the production of cars and plans to assemble cars under its brand there. But, according to Kommersant, the decision has not yet been made.

Sollers also has a joint venture with Isuzu. The Japanese newspaper Yomiuri wrote that the company may abandon production in the Russian Federation due to problems with the supply of components. Isuzu then said that they were considering various options, but they did not make a decision to withdraw from the Russian Federation. According to Kommersant, Sollers Isuzu returned to discussing the termination of the special investment contract (SPIC) for the production of cars in the Russian Federation. The processes may not be related: at the end of 2021, the head of Isuzu Rus, Fabrice Gorlier, in an interview with Kommersant, spoke about plans to reconsider cooperation with Sollers, and possibly abandon the SPIC, since he did not give the company any preferences.

At the same time, production at all automobile plants of Japanese concerns in the Russian Federation has been suspended since March. All of them were heavily underloaded – this is also typical for other auto industry enterprises in the Russian Federation, with the exception of the Hyundai plant in St. Petersburg, due to the fact that they were built with the expectation of a market of 2-3 million cars annually.

Judging by the AEB statistics, stocks of Japanese cars in the Russian Federation are almost exhausted: for example, in September, from 200 to 500 cars of each of the listed brands were sold when selling from several thousand a year earlier to 10 thousand from Toyota (with the exception of Isuzu, which sold 17 cars vs. 50 in September 2021).

Japanese brands have traditionally been in demand in Russia: they have the largest fleet of foreign manufacturers, numbering 10.6 million cars at the beginning of 2022.

This is 23.3% of the total fleet, calculated by Avtostat. In 2021, in terms of imports to the Russian Federation, Japanese brands took second place (56.7 thousand cars) after Chinese ones. The share in sales of passenger cars and LCVs of Japanese brands was comparable to sales of Volkswagen (including Skoda and Audi), amounting to about 14% of the market, follows from the AEB data. At the same time, half was accounted for by Toyota (including Lexus) – 7%.

Sergey Udalov from Avtostat notes that Toyota, Nissan and Mitsubishi have a high loyalty among the audience in the Russian Federation, and Toyota also has a high residual value. At the same time, he recalls, loyalty will remain, including due to the influx of used cars from Japan. It remains high: from January to August, 128.4 thousand cars were delivered to the Russian Federation, according to Japanese customs statistics. As a result, if the brands return, they will not lose their adherents, the analyst notes. At the same time, globally, for a successful return to the market, the dealer network is more important than the plant, he continues: “The question is how the same Nissan will disperse with dealers.” Kommersant’s source in auto retail said that the brand sent a message to its dealers that no investments would be compensated.

Olga Nikitina