Manufacturing Turkey’s automotive sector is decelerating sharply By William Sellars September 17, 2024, 9:16 AM Altan Gocher/Hans Lucas via Reuters Connect Turkey's domestically produced Togg is a bright spot in the sector as sales of electric vehicles rose 159% in the first eight months of 2024 August output down 27% on 2023 Car exports also in decline Sales of electric vehicles rising Output in Turkey’s powerful automotive sector decelerated sharply in August, in a year-long trend that has seen domestic production fall and exports slow. Local manufacturers say they are facing competition from imports and grappling with sky-high interest rates. Total vehicle production in August was 53,000, down 27 percent compared to the same month last year, with passenger vehicle production falling more than 40 percent to just 29,400 units, according to data issued by the Automotive Manufacturers Association, on Monday. Exports of passenger vehicles also fell, declining 37 percent with just 31,000 cars shipped, well short of the 51,800 imported to the domestic market. Turkish car sales fall for fourth consecutive month Turkey commits billions to domestic high tech funding Turkish industrial output hamstrung by falling demand Though imports only posted a modest 0.5 percent increase for the month, the eight-month total of 429,000 units eclipsed Turkish car exports of 411,000 for the January to July period. One of the few segments to accelerate was electric vehicles. Sales rose 159 percent in the first eight months of 2024 as 41,300 EVs rolled off Turkey’s lots, a third being the domestically produced Togg, built by a state-supported conglomerate of local manufacturers. With up to 70 percent of new car sales – both conventional and EV – being imports, more needs to be done to protect the domestic car industry, Anıl Şentürk, the chair of the Istanbul Chamber of Commerce’s automotive sector committee said after the production data was released. “There needs to be some incentives, long-term plans to protect local production,” Şentürk told AGBI. “Measures are needed to increase the domestic market, maybe introduced through exemptions on special consumption taxes for local vehicles. “These will help the domestic market grow and attract foreign investment, which would contribute to an increase in domestic production.” Impact of interest Production of most commercial vehicle types, including trucks and buses, also fell by between 40 and 51 percent, pointing to a cooling of the local economy and the broader issue of difficulties in obtaining credit, with private banks charging 55 percent or more interest on auto loans. High input costs, including rising wages, are also hitting the industry Şentürk said, driving some production offshore and hurting commercial sales. “Local production is falling due to some facilities moving to other alternative locations. As a result, we see a drop in commercial vehicle output for example, while some factories are stopping or cutting down shifts as expectations for growth narrow.” However, Şentürk was more optimistic for the medium term, with expectations that the Central Bank may start rolling back its main lending rate, which has been held at 50 percent since March. “If we start seeing cuts in the policy interest rate and credit loan borrowing rates are lowered, demand will rise,” he said.
