Turkey’s auto sector has come of age over the last couple of years and the country has established itself firmly as a regional hub for automotive production. Many of the world’s biggest automakers have been attracted to Turkey by the low labour costs and the strategic geographical positioning that allows companies to serve export markets in Europe, the Middle East and North Africa.
In 2010, production increased by 25.9% year-on-year (y-o-y) and the domestic market for vehicle sales boomed with a 37.3% y-o-y increase in vehicle sales. For H111, the industry followed the same pattern of impressive growth. Results showed y-o-y sales of passenger cars and light commercial vehicles increased 59%. This set some alarm bells ringing and BMI cautioned that there was a danger of macroeconomic overheating if consumption continued to rise at such an unsustainable rate. H211 has seen a slowing in demand helped by the government’s increase in the rate of the Special Consumption Tax (OTC), which was introduced to act as a break on public consumption and to try to ease Turkey’s current account deficit. The tax increase will add 25% to the price of larger engine vehicles and 10-15% to those with smaller engines. This has helped ease demand, and in November, car sales were registering a more manageable 21% y-o-y rise for the year to date with total vehicle sales of 774,861 units.
BMI believes that in 2011 total new vehicle sales rose 16.6% y-o-y. It is our contention that the market for vehicle sales will remain robust in subsequent years and that the market will grow by about 10% per year up to the end of the forecast period in 2016, except in 2012, when sales will grow by 7.1% y-o-y.
The export market for Turkish-produced vehicles remains more uncertain, particularly with regard to sales to Europe. The extent of the effect of the euro crisis on vehicle sales to the European Union remains uncertain, but there is likely to be a dip in demand to that market. However, Turkish vehicle exports appear likely to grow in the Middle East and North African (MENA) market. Sales in Israel, for example, have been strong with 10% of all vehicles sold in the country being produced in Turkey. Car manufacturers continue to invest in Turkey with an eye on export production with Toyota Motor, Honda Motor and Tofa?, a joint venture between Fiat and local conglomerate Koç Holding, all making recent announcements of new investment in production facilities.
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