Economy

Turkish car sales fall for fourth consecutive month

August 5, 2024, 8:30 AM

Imported cars at Haydarpaşa Port in Istanbul, Turkey. While vehicle sales have fallen in general, vehicle imports have surged

Consumer confidence drops
Taxes and borrowing costs hit sector
Vehicle imports show increase

Turkish vehicle sales slipped in July, as concerns over the economy, high costs of borrowing and car-sale taxes dented consumer sentiment.

July car sales reached 94,000 units, according to a report released on August 2 by Turkey’s Automotive Distributors and Mobility Association (ODMD).

The July figure represents a 17.5 percent year-on-year fall and marks the fourth consecutive month of declining sales.

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Sales of passenger vehicles dropped 16 percent in July to 73,400 units, on top of a 3.6 percent fall the previous month. The fall in commercial vehicle sales was even sharper, with just 22,641 units rolling off Turkey’s lots in July, down 22 percent year on year, an indicator of a broader slowing of the national economy.

It is likely automotive sales have been hit by a fall in consumer confidence, which in July fell to its lowest level since January 2023, according to data issued by state statistics agency Turkstat on July 23.

The agency’s consumer confidence index dipped three percent in the month, falling to 76 points, well short of the 100 that indicates an optimistic outlook.

Turkstat’s broader economic confidence data, released on July 30, showed a similar trend, with the index falling to 94, the weakest since August last year.

The manufacturing industries sub-index, which includes the automotive sector, retreated into negative territory for the first time since July 2020, at the height of the first wave of the Covid-19 pandemic.

The July data was not as bad as the industry had projected, according to Ömer Şahin, market analyst for automotive sector consultancy EBS, despite the accumulation of pressures from borrowing limits, rising costs and taxation.

“Indeed, we were expecting a higher narrowing in the automotive market in July,” he told AGBI.

“For the last two years there has been a scheme to cool down the economy and the automotive market in place. For two years there has been a cap of TL400,000 [$12,060] on automotive credit loans, something like the cost of a motorbike today.”

Once special levies and value added taxes are added, a buyer pays 116 percent in tax on the value of a vehicle, Şahin said.

One segment of the market that went into overdrive was vehicle imports, which in the first half accounted for just under 70 percent of all sales in Turkey, representing 400,000 units out of the total 578,000 sold between January and June.

In part, this is a result of manufacturer Ford moving production of its flagship Courier light commercial vehicle from Turkey to Romania, but also domestic demand for passenger vehicles that have a high resale value.

“Over the past two years, the public has seen vehicles as an instrument of investment and an asset that can be quickly converted to cash,” said Şahin.

With inflation of 72 percent in June, and no reduction in borrowing costs – currently running at above 50 percent per annum – expected until late this year, any incentive to enter the new vehicle market, either as an investor or owner, may not appear any time soon.