Saturday, April 1, 2023
 
 

Major Japanese auto companies giving up on Russia

Temporary suspensions due to Ukraine-related sanctions turning into closures and permanent factory sales

- Advertisement -

Toyota and Nissan, two major Japanese automakers with substantial manufacturing capacity, pulled out of Russia after both claimed that carrying out any future business under Vladimir Putin’s dictatorship is impossible.

The two companies also convinced their senior management that production suspensions caused by Western sanctions have caused mounting shortages of key components and materials. Toyota announced in early autumn that it would be closing its plant in St. Petersburg, and was considering selling it.

Production at the plant, which produced Toyota’s Camry and RAV-4 models. has been suspended since March. While Toyota has opted to end its Russia-based production of vehicles, it has stated that it will keep a vastly downsized organization in Russia to provide service and parts to existing Toyota and Lexus customers.

Nissan followed Toyota’s announcement that it is also pulling out of Russia. It will sell all of its shares to a locally registered joint venture firm linked to Nissan Manufacturing Russia LLC that runs the St. Petersburg plant to a state-owned entity for one euro. The transaction includes provisions that allows Nissan to re-assume ownership if the situation changes in the coming years.

The plant employed about 2,000 workers and produced 45,000 SUVs annually until operations were halted in March after Russia invaded Ukraine. The pull out will generate a loss of ¥100 billion or about $686 million for Nissan.

This transaction echoes a move by Nissan’s top shareholder, French automaker Renault, which sold its majority stake in Russian carmaker Avtovaz to a Russian investor in May.

Japanese auto manufacturer Mazda is reportedly also in talks with its local joint venture partner to end production at its factory in Vladivostok, as is Mitsubishi Motors.

The normal practice in these closure cases is to manage them as share transfers among commercial entities instead of portraying them as what they are in most cases, nationalization.  Some of the Western plants idled by sanctions have allegedly been kept in the private sector, through share sales to Russian oligarchs cooperating closely with Putin.

The net impact of these withdrawals will not be seen in immediate unemployment for the factory workers, but in a medium- to- long-term hollowing out of many Russian industrial units/capabilities dependent on Western technology and inputs.

That is, of course, the intent of theWestern sanctions program, which is working to steadily raise the long-term cost to Moscow for its invasion of Ukraine.

Although denied by Kremlin state propaganda, the lesson will not be lost on Russia’s leaders.

- Advertisement -

Subscribe to our newsletter

Co-founder and Executive Director for Global Economics and Southeast Europe at NE Global Media.  Former US diplomat with previous assignments in Eastern Europe, the UN, SE Asia, Greece, across the Balkans, as well as Washington DC.

Latest

When it comes to defense, the politicians must listen to those who know best – the generals

The halls of power are walked by people who know little, care even less and yet have the right to supersede and ignore the advice of those who know better.

Silicon Valley Bank financial contagion contained – for now

The world’s top policymakers and international financial leaders acted effectively in the days following the collapse of California’s Silicon Valley Bank. They appear to have dealt positively with the risk of wider global financial contagion.

EU plan to centralize gas purchases near impossible to implement

The global gas supply market will be much tighter this year than it was in 2022. The need for the EU to buy more gas, especially more liquified natural gas, from elsewhere will be greater.

Don't miss

When it comes to defense, the politicians must listen to those who know best – the generals

The halls of power are walked by people who know little, care even less and yet have the right to supersede and ignore the advice of those who know better.

Silicon Valley Bank financial contagion contained – for now

The world’s top policymakers and international financial leaders acted effectively in the days following the collapse of California’s Silicon Valley Bank. They appear to have dealt positively with the risk of wider global financial contagion.

EU plan to centralize gas purchases near impossible to implement

The global gas supply market will be much tighter this year than it was in 2022. The need for the EU to buy more gas, especially more liquified natural gas, from elsewhere will be greater.

Africa’s porous borders promote transnational crimes rather than deeper integration

For positive continental regimes to succeed, there must be both conscious and concerted efforts, as well as political will, from all states to help eliminate transnational crimes while fostering integration across the whole of Africa through trade.

When it comes to defense, the politicians must listen to those who know best – the generals

The halls of power are walked by people who know little, care even less and yet have the right to supersede and ignore the advice of those who know better.

Silicon Valley Bank financial contagion contained – for now

The world’s top policymakers and international financial leaders acted effectively in the days following the collapse of California’s Silicon Valley Bank. They appear to have dealt positively with the risk of wider global financial contagion.

Cambodia’s current government is the face of tropical Fascism

There is no hope that the authoritarianism that the world sees in places like Russia, China and Cambodia can ever be interpreted as a peaceful and benign phenomenon, or that it should be accepted by an implicit racist or discriminatory assumption that some cultures just don’t have a democratic tradition and aren’t quite capable of ever developing one.

Georgia has shown the world that a Kremlin project can be defeated

In early March, the world’s attention was on Georgia. We saw massive protests fueled by anger, concerns and fear, and eventually, we witnessed a...

Putin’s New START withdrawal has broad implications

Vladimir Putin continues to persuade Russians that the West provoked his imperialist war of aggression against Ukraine. His announcement that he would no longer...

Sanctions, sanctions everywhere

On February 24, 2023, the US Government alongside G-7 leaders announced via a White House statement a new set of trade and economic measures...

Providing Ukraine with advanced Western fighters is a logical step towards battlefield success

While Ukraine may have weathered the storm of Russia’s initial onslaught and retaliated with a force and determination largely thought to have been beyond...

Russia’s war in Ukraine and high fertilizer costs are causing global food crisis

Russia’s war in Ukraine and high gas prices have boosted the cost of fertilizers having a major downstream effect on the global food supply,...