TBY talks to Jean-Pierre Vieux, General Manager of Peugeot Turkey, on the automotive industry's domestic and export growth prospects.

Jean-Pierre Vieux
Jean-Pierre Vieux, began his career with Peugeot as the Director of New Products, and has held many other products at Peugeot including Director of International Affairs, in charge of Argentina, Chile, Paraguay, and Bolivia. After also spending time in locations such as Poland and Africa, he became the General Manager of Peugeot in Turkey.

What factors are driving the growth of domestic demand for cars in Turkey?

First of all, we have to consider the size of the auto fleet in Turkey. For every 1,000 people there are 135 to 140 cars. In Western Europe there are 500 to 600 cars per 1,000 people. That means that in Turkey there is a lack of cars. People need more cars than we are selling today. There are roughly 72 million inhabitants in Turkey, yet there are only 10 million cars. The amount of cars is five times less than it should be. If you visit Turkey or Istanbul, you can see a lot of public transport. There are more buses and minibuses than in any other country. However, a car in Turkey is very expensive due to taxes. There are three types of taxes. The first type is the Special Consumption Tax (ÖTV). For a car with an engine capacity lower than 1,600 cc, the tax is 37%. If it is between 1,600 cc and 2 liters, it is 60%. If it is over 2 liters, then it is 84%. On top of that there is VAT, which is 18%. In addition to that, as in any country, you have a tax two times a year that is roughly €300. Taxation is very high. As a result, it is difficult for people to buy cars unless their credit is good. In the last decade in Turkey we have had a very stable rate of inflation. When you have a high level of inflation, you have a high level of interest in credit. Inflation has decreased and stabilized now. The credit rate has decreased a lot. For the customer, there is a very good advantage in buying a car now. This started at the beginning of 2010. The market has improved a lot since then. It is part of the reason that we have reached 760,000 cars sold since the beginning of 2010, which is 37% more than it was in the previous year. However, the normal market for this kind of population should be close to 1.5 million vehicles. In France, for example, the market is close to 2 million cars per year.

What models do you find are particularly successful in the Turkish market?

Small cars are very popular here. I believe it is a part of the B segment. This for us is the 206, the 207, the Clio, and so on. This is due to the capacity of the engine and the price of the cars. The taxes vary for different types of cars. Light commercial vehicles carry another level of taxation. A vehicle that can carry 75 times the weight of each passenger has a 10% tax, whereas a car designed for individual usage has a 37% tax. Therefore, the market for light commercial vehicles is huge and it is successful. Sedan cars are also successful in Turkey. Here you can see cars with trunks—even in the small segment. This type of car gives status here, and so we are selling a lot of them.

What steps have you taken to increase Peugeot's market capture in Turkey since you came in as General Manager in 2007?

We started the subsidiary of Peugeot in Turkey in 2001. At this time we asked for new investors to make dealerships and to invest a lot because our expectations were high. Peugeot's revenues between 2004 and 2005 were very successful and we reached a market share of 10%. After, we dropped in terms of sales. When I arrived I tried to re-motivate the staff. I used my recent arrival—a change—to re-motivate them. On top of that, I would say that they let me adapt our commercial policy toward Turkey. Before coming here, I was in charge of Poland, Africa, and the French Territories. I also worked in South America. I always say that when I arrive, I arrive with experience. I use this as a fact to allow myself to be confident in what I do. As a result, I adapted to the Turkish system quickly. I was listening to the network and trying to understand the market. I would say that Peugeot became Turkish quickly. We have also added good products. We launched the Bipper, which is a Turkish car produced in the Tofaş plant in Bursa. After that we launched the 3008 and the 5008. Those models have helped a lot to recover our market share. We have now reached 5.7%. This is not enough. If you look at our presence in the market in terms of model range, we have an answer for only 64% of the demand. If you apply our 5.7% of the 64% to the entire market, then we have close to 9% of the market. We have 84% of the market in light commercial vehicles. Today, with that, we have between 9% and 12% of the market share. Overall, the position of Peugeot in Turkey should be between 8% and 10% minimum.

What are the prospects of Peugeot investing in production here in Turkey?

At this point it is important to discuss why we did not finish the project that we had started here before the crisis. It was in October of 2008. Due to the effect of the crisis, the capacity of our plants in Western Europe was not totally used. As we had unused capacity in European plants, we chose not to invest more abroad in new plants without fulfilling the capacity of our plants in Western Europe. The car we were supposed to produce in Turkey ended up being produced in Spain. This car, which is a sedan, will start to be produced in 2012. It is a very successful car in Turkey but it will also have to be successful in North Africa. When I see the car, I still believe that it has a market in Europe. This means that the potential of the plant in Spain will not be sufficient in the future. If the Turkish market continues to improve, we will need cars and maybe at this moment we will need to make a new investment for Peugeot. At this moment, I am convinced that Turkey will part of the decision.

How would you rank the production base of Turkey compared to other countries?

There are two important things here. In the production of cars, Turkey has significant experience. It has been producing cars for more than 30 years. The industry has learned a lot and learned quickly. Secondly, Turkish people take a lot of pride in their work. As a result, the quality of the cars produced here is very good. In my career, I also saw that in Chile as well. The quality in Turkey and Chile is very good. If you ever have a problem with a car as it comes off the assembly line, you only have to say something once. This is because it will not happen a second time. Quality is very important here. For the price, Poland is less expensive than Turkey. Turkish production is not as high as Western Europe, but is not the lowest in the area. It is not for cost that we come to Turkey—we come because the suppliers are here. We buy parts in Turkey to export to the French plant and other countries. The suppliers and technology are present and the quality is good. When you look at the cost of a car, logistics are very important. You have to produce cars where you are selling them. If you produce a car and then have to send it around the world, you can be sure you will not be competitive on price. To produce a car, we have to be confident that the market where we produce this car will be good. This is also a reason why we chose Turkey for this project. In addition, 80% of Turkish production is exported to Western Europe. This means that the quality of the car is good and the technology is good too. The main issue in Turkey for us is that the currency is not the euro. When we have to play with the exchange rate, sometimes it is good and sometimes it is not good. But this is the only risk, and so there is no doubt that we have to produce cars in Turkey.