Russia nationalises Nissan plant in St Petersburg, other Japanese carmakers could follow

Russia nationalises Nissan plant in St Petersburg, other Japanese carmakers could follow
All of the Russian assets of Japanese carmaker Nissan, including its plant in St. Petersburg, will be taken over by the state. / bne IntelliNews
By bne IntelliNews October 11, 2022

All of the Russian assets of Japanese carmaker Nissan, including its plant in St. Petersburg, will be taken over by the state, RBC business portal reported citing an announcement from the Ministry of Industry and Trade. The deal will be structured the same as the pullout of Renault from Russia, with an option to buy back Nissan’s assets within six years.

As followed by bne IntelliNews, Russia's largest carmaker AvtoVaz was effectively nationalised after its largest shareholder French carmaker Renault handed over its stake in the company to the state for one ruble.

In 2021, 22,100 Nissan Qashqai, 20,300 Nissan X-Trail and 2,500 Nissan Murano models rolled off the St. Petersburg assembly line. The plant suspended operations in March, shortly after the start of the military invasion in Ukraine, and was not able to restart the assembly line since.

"The deal involves the transfer of 100% of Nissan's assets in Russia (under the legal entity Nissan Manufacturing Rus) to NAMI [state-controlled unit]. This includes Nissan's production and R&D facilities in St. Petersburg, as well as a sales and marketing centre in Moscow," the ministry said, while adding that about 2,000 jobs on the Nissan plant will be preserved.

AvtoVaz will provide service and spare parts for Nissan vehicles in the meantime, as well as warranty and servicing of Nissan cars on the Russian market.

 "Once the necessary agreements have been signed, AvtoVaz will begin the process of taking over the warranty and post-sales service for Nissan customers, using similar successful experiences with the Renault brand," the company said as cited by RBC.

"On behalf of Nissan, I would like to thank our Russian colleagues for their contribution to the development of our business over the years. We are now unable to restart our operations, so the best possible solution was found to support the employees," Nissan president and CEO Makoto Uchida commented on the deal.

Nissan estimates losses from withdrawal from the Russian market at $686m or 100bn Japanese yen, the company said in a press-release.

Analysts surveyed by Kommersant believe that after being left behind by Nissan, the St. Petersburg assembly line will be able to resume its operations no sooner than 2H23. They suggest that it could be repurposed for assembly of Russian, Chinese, or Iranian vehicles.

While the sanctions have brought the Russian car market screeching to a halt, in August and September sales of AvtoVaz Lada models actually recovered slightly due to the resumption of the state-sponsored discounted car leasing programme.

However, the government's ability to support the car market next year was questioned, making the potential pullout of the mass market Japanese carmakers potentially more dangerous.

According to AEB, which publishes monthly data on the Russian car market, the stock of Japanese cars in Russia is almost depleted, and in September only 200 to 500 vehicles were sold for each of the Japanese brands, compared to sales of several thousand a year earlier, and 10,000 for Toyota.

Japanese brands have the largest fleet of foreign manufacturers in Russia with 10.6mn vehicles at the start of 2022, making 23% of the total passenger car fleet, according to Autostat. In 2021, Japanese brands imported 56,700 cars to Russia, second only to China. 

At the same time market participants and analysts suggested to Kommersant that other Japanese carmakers could follow Nissan’s lead.  Japanese companies are known for their "solidarity to each other", an unnamed carmarket source told the daily.

In September Toyota has already announced the closure of its plant in St. Petersburg, but it planned a restructuring of a local division and continues to service cars. 

Mitsubishi is another member of the Renault-Nissan-Mitsubishi global alliance and is yet to make an official statement on its Russian assets.about the fate of its Russian assets. Mitsubishi has a 30% stake in the PSMA Rus plant in Kaluga, with Stellantis holding the rest. Nikkei previously reported that Mitsubishi is also considering an exit from Russia. 

Kommersant also previously reported that Russian car assembler Sollers is discussing buying Mazda's stake in their joint venture to resume the assembly under its own brand. Sollers also has a joint venture with Isuzu. The Japanese newspaper Yomiuri wrote that the company may give up production in Russia because of problems with parts deliveries. According to Kommersant, Sollers Isuzu are mulling cancellation of the special state-sponsored investment contract (SPIK) for manufacturing cars in Russia. 

Analysts surveyed by Kommersant believe that high brand loyalty for Japanese cars will persist in Russia, and the imports of new cars will be replaced by imports of used Japanese models.