Turkey's automotive business, while well rooted, remains susceptible to the economic and regulatory climate, with consumer financing a crucial component.

By 2010, Turkey had become the world's 16th largest auto-manufacturer, a landmark moment in for an industry that emerged in the 1950s as a state-protected sector, and evolved in the domestic and export arena once the neo-liberalism of the 1980s had opened the field through privatization. Turkey's automotive industry dates back to the 1959 launch of the Otosan plant in Istanbul to roll out Ford models built under license. In 1968, Tofaş opened its Bursa plant to build Fiat models under license. And a year later, Oyak-Renault's plant also opened in Bursa making Renaults. The swinging 1960s, still a time of state protectionism, saw Turkey's first mass-produced indigenous car the Anadol, long defunct, but today a cult classic, made by Otosan. Huge investment in manufacturing technology fueled export efforts in the 1990s, while in 1996 Turkey's EU Customs Union entry saw local plants become integrated production bases. In terms of the automotive value chain, Turkey's comparative advantage lies in the raw materials, parts, and assembly components. Today, other global automotive manufacturers such as Toyota, Honda, Opel, Hyundai, Mercedes-Benz, and MAN AG also manufacture cars, trucks, vans, and buses at their respective Turkish plants. General Manager Dinçer Çelik of local bus manufacturer TEMSA told TBY that, “TEMSA was the first 100% Turkish-owned company to represent Turkish automotive activity." TEMSA has an annual production capacity of 11,250 vehicles, sold domestically and to 64 countries.


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.


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.


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 Şeker 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.