Lexus Lost Tons Of Cash By Leaving Russia

Russia's invasion of Ukraine has had serious ramifications for the automotive industry. The conflict has tightened already strained supply chains across the industry, and numerous automakers have pulled out of Russia as a result of economic sanctions, as well as in protest of the nation's actions towards Ukraine. Lexus is one of those. After Russia invaded in February, Toyota and Lexus pulled out of the nation.

The Russian market was huge for Lexus. It made up a significant chunk of the Japanese brand's European sales. In 2021, Lexus sold 72,441 units in Europe, 19,638 of which went into Russia. Another 1,881 of those were sold in Ukraine. All said and done, that accounts for roughly 30% of Lexus' European market sales, which the brand is hoping to bolster with the release of new models like theLexus RZ. That is set to debut in January next year for Europe.

Whether that works remains to be seen, and for now, Lexus will no doubt be feeling the effects of losing its Russian market. In this year's first quarter, which ended in April, Lexus sold only 1,738 cars in Russia. Based on the brand's first-quarter statements, that adds up to a decline somewhere in the neighborhood of 76%. Luckily, Lexus has other footholds in Europe, like the UK.

There, Lexus managed to sell 13,840 units. While not as large a segment as Russia, it is a solid consolation prize for a brand now down a huge chunk of change due to Russian warmongering. Interestingly, Lexus is a well-liked brand in Eastern Europe. The brand's third-largest European market last year was Poland, with 6,081 units sold there. For now, Lexus' production capacity has not been significantly hampered by its departure from the Russian market.

It remains unclear where Lexus will pick up the loss it took in Russia. While Lexus is a popular choice in America, it would need a significant bump in sales to compensate for the Russian loss. Perhaps the all-new RX that debuted this week or the recently unveiled RZ, the brand's first electric model in the US, can accomplish that. Offering a diverse electric portfolio is fast becoming a successful recipe for brands. Porsche, for instance, sold more Taycan EVs than 911s in 2021.

While obviously not a storied sports car maker like Porsche, the lesson is still there for Lexus. In order to recoup the Russian losses it took, the brand has to electrify, and quickly. Historically, Japanese automakers have failed to do so, but maybe Lexus can change that.