In this video, a wreck happens(That's not the problem, wrecks are expected) and at about 22:05 the car gets hit onto the grass. It then doesn't know what to do and starts doing donuts. Sometimes this continues forever, but sometimes the car can manage to get free. This car finally escapes at 23:45. This also happens several other times in the race, this is just the one that lasted the longest time.

I've had it happen /sometimes/ 9/10 times its the AI spinning the wheels too much and causing the car to donut. Least in my experiences.

Because LFS AI are programmed to a single path and they rarely veer off that trajectory. Unlike games like Raceroom or rF where the AI are active (as in alive and able to calculate driving themselves) and "react" to situations, in LFS they just join the preset path.

So if you push them onto the grass their first reaction is to steer in the direction of the race path and then hammer the throttle to attempt to get on tarmac. Which doesn't work, of course.

Same reason why they don't move for blue flags or react to a stalled car fast enough.

AI in LFS is definitely passable in a race scenario but otherwise I'm sure they"re dude an update or two.