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Automotive

A HAIRY MARCH The Turkish automotive sector appreciated 9.2% in 2013, lifted by the 19.5% YoY rise in passenger cars, while LCVs and HCV (heavy commercial vehicles) respectively slipped 14.8% […]

A HAIRY MARCH

The Turkish automotive sector appreciated 9.2% in 2013, lifted by the 19.5% YoY rise in passenger cars, while LCVs and HCV (heavy commercial vehicles) respectively slipped 14.8% and 0.3% YoY. Meanwhile, Automotive Manufacturers Association retail sales data as of March 31 2014 reveals a 23.5% YoY decline overall, where PCs lost 21.9%, and the LCV segment 32.1% YoY. The PC segment has been impacted by Turkey’s high SCT (special consumption tax) rate imposed of 64.6%. The increase in SCT for vehicles with cylinder capacity below 1,600cc, between 1,600 and 1999cc, and over 2,000cc is estimated to reflect in price increases of 3.5%, 6.4% and 15%, respectively in 2014.

DRIVING BUSINESS OVERSEAS

Turkey’s automotive sector is a cyclical affair, susceptible to economic volatility and the regulatory environment. The global credit crunch of 2008 slashed local automotive production by 63% YoY in 2M2009, as exports slumped 61.6% for the period. Yet, exchange rate rises generally mean fatter revenues for exporters. This is why domestic travails impact Tofaş and Ford Otomotiv less, as these chiefly rely on exports with Tofaş at 60%, and Ford Otosan at 70% of total sales. Automotive exports claimed 14.7% of Turkey’s overall exports as of year-end 2013. And a kinder economic climate in Europe led to exports accounting for 73.6% of production for the year. Export unit sales climbed 13.5% YoY.

2014 OUTLOOK

The slippage in Turkey’s consumer confidence index, a key gauge of auto demand, will make 2014 a tough year for Turkey’s domestic market. In February, the print saw its third consecutive monthly decline (to 69.2 from January’s 72.4) since February 2010’s 68.6. This will be exacerbated by recent regulations curbing the amount, and installment number, of auto-loans. The latter stipulates 70% of the amount for vehicle borrowings below TL50,000, and 50% of the amount for borrowings above TL50,000. According to Åžeker Invest research, the domestic market is expected to contract by 17.1% in 2014 and, “…when coupled with the 8% rise in exports in 2014, [this] makes for a flat production number in the Turkish automobile industry of 1.12 million units.” This scenario will impact purely domestic-oriented Doğuş Otomotiv the most. Moreover, the bulk of its portfolio has a price tag of over TL50,000, whereby Turk’s credit pinch will spell further loss.

Growth potential exists, with vehicle ownership in 2010 of 154 per 1,000 compared to the OECD average of 563—this despite the economy being the 17th largest among the OECD.

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