Overview of Turkey’s Automobile Market in 2021

The automobile industry of Turkey (Republic of Türkiye) in 2021 was affected by the shortage of semiconductor supply and rising raw material prices, so the number of automobiles produced shrank by 1.7% from the previous year to 1,276,140 units. Vehicle sales fell by 2.9% year-on-year to 772,722 units. On the other hand, automobile exports recovered to 937,005 units, up 2.2% year-on-year, due to strong demand in Europe. Vehicle production fell for the second year in a row in 2021. Passenger vehicle sales decreased 8.4% year-on-year to 782,835 units, while commercial vehicle sales increased 11.4% year-on-year to 493,305 units, with pickups, medium-duty trucks, and heavy-duty trucks each posting double-digit growth.

Turkey: Recent Developments

Industry Trends

・In April 2022, Ford started mass production of the E-Transit BEV van at a local joint venture. - The company plans to invest 2 billion EUR for mass production of the E-Transit, and plans to increase the annual production capacity of the Turkish plant from 455,000 units to 650,000 units. The plant will also have a line to assemble at least 130,000 batteries per year. ・In April 2022, Korea's SK Innovation announced plans to build a lithium-ion battery plant jointly with Ford and Turkey's Koç Holding. - It is planned to be built near Turkey’s capital Ankara. The annual production capacity is expected to be 30-45GWh. - It will be supply BEV vans produced at Ford's Turkish plant. Production will start in 2025 at the earliest. ・In April 2022, Mitsubishi Motors announced that it will launch the Colt, a compact hatchback manufactured by Renault's Turkish plant, in Europe in the fall of 2023.

Policy Trends

・In October 2021, Turkey approved the Paris Agreement. - The government plans to accelerate efforts such as the CO2 emission reduction plan announced in July 2021 and the climate law. ・In January 2022, the base price, which is the basis for calculating the tax amount, was changed in order to respond to the actual increase in the special consumption tax due to the rise in automobile prices triggered by currency depreciation and inflation. - Due to the rise in automobile prices, most models that were previously subject to the minimum tax rate are now subject to higher tax rates. - However, the pace of inflation is fast, and the industry requires regular changes to the base price. - This change is expected to have the effect of reducing automobile prices by approximately 3% to 16.7%, depending on the applicable tax rate. - In addition to the existing three tax rate categories of 45%, 50% and 80%, new categories of 60% and 70% have been added.

Economic Trends

・According to the Turkish Statistical Institute’s announcement in March 2022, the real GDP growth rate for the full year 2021 was 11.0%, exceeding the government’s target of 9.0%. - The rapid increase in exports accompanying the recovery of demand from the pandemic, the rise in household final expenditure, and the accompanying recovery in investment in machinery and equipment contributed to this increase. ・Regarding the economic outlook for 2022, among local economists, there is a tendency to believe that economic deterioration is inevitable due to inflation triggered by currency depreciation, rising energy prices following Russia's invasion of Ukraine, and the sluggish tourism industry.

---