Turkish car market shrinks by more than quarter in five months

ISTANBUL

Turkish automotive sales fell 28.7 percent to 58,121 vehicles in May, the Automotive Distributors Association (ODD) has announced, revealing the five-month decline has reached 26.3 percent.

The Turkish automotive sector’s downfall continued in May as fresh data showed that sales dropped 28.7 percent during the month, extending a five-month decline to over 26 percent.

A weak foreign currency ratio and an increase in loan interest rates, as well as tax hikes and macroprudential limits introduced on loans and payments, have dealt a major blow to the market since the beginning of 2014.

According to figures announced by the Automotive Distributors Association (ODD) on June 4, the Turkish passenger car and light commercial vehicle market decreased nearly 29 percent to 58,211 units in May compared to the same period last year.

The sector produced 226,698 units in the first five months of the year after plunging by 26 percent.
Passenger car sales declined by more than a quarter to 46,379, while the light commercial vehicle market shrank more than 38.4 percent to 11,742 units, the ODD data showed.

The market has been adversely affected by the weakening of the Turkish Lira against the dollar and euro, which has raised the cost of imported vehicles.

Unexpected special consumption tax (ÖTV) hikes combined with measures introduced by the country’s banking watchdog, BDDK, to limit car loans have also heaped more pressure on the sector since the beginning of the year.

In a statement released to announce sales figures, the ODD also cited a decline in confidence indexes, economic activity and private sector retreat and a slowdown in domestic consumption, in addition to weaknesses stemming from currency ratios, BDDK regulations and tax hikes.

The organization also said a partial recovery of confidence indexes and more optimistic general economic situation expectations in April and May have yet to be reflected in the market.

Forecasting that the tough environment will not recover, the ODD says it expects the market to produce around 650,000 to 700,000 units by the year-end, representing a drop of between 18 to 24 percent. In 2013, the market produced 853,378 units, good for a 9.72 percent annual increase. 

Volkswagen, which is distributed by Doğuş group in the Turkish market, was the top seller in May with 9,149 vehicles. Renault, Fiat and Ford followed the German car maker with 7,226, 6,855 and 5,593 vehicles sold, respectively.

Volkswagen has been the top car seller in Turkey for years, but it does not conduct production in the country, despite intense lobbying efforts by the Turkish government. In March, the auto giant announced it would establish a new factory in Poland instead of Turkey.

However, another global giant, Japanese motor company Nissan, has reportedly decided to establish a plant in Turkey, marking the first auto investment to be made by a company with no previous presence in the country for 17 years.

The carmaker is reportedly deciding whether to locate the plant in İzmir or the northwestern province of Adapazarı.

Nissan’s investment would make it the fourth Japanese giant in the Turkish sector, after Toyota, Honda and Isuzu.