Business & Industry

Jun 1, 2015

Turkish auto industry in expansion

The foundations of Turkey's automotive industry date back to the early 1960s, when the first efforts to develop and produce the first Turkish-made passenger car were undertaken. During a period of rapid industrialization and progress, this key sector transformed itself from assembly-based partnerships to a fully-fledged industry with design capability and a massive production capacity. 

The automotive industry is one of the main drivers of the manufacturing sector in Turkey: creating job opportunities for more than 400,000 people, the automotive industry is also one of the main employers in the country. It is also an export champion, accounting for a 16 percent share in total exports, as three out of five top exporters operate in the automotive industry.

In addition, the automotive sector plays a vital role in transferring know-how and high-tech production capabilities to Turkey; 50 out of 137 R&D centers in Turkey have been set up by companies in the automotive industry. The qualified labor force it employs to utilize technology is crucial to the country's other strategically important sectors. More than one third of R&D personnel in Turkey work in the automotive sector.

Therefore, further developing and increasing the competitiveness of the sector is of utmost importance for the Turkish economy's sustained growth.

The Turkish government published an official automotive sector strategy document in a bid to shape the future of the industry. "Enhancement of sustainable global competitive strength of the automotive sector and its transformation into a structure using advance technology and generating high value-added" has been designated as the primary objective in the document. The document also defines the actions to ensure the achievement of this main target. The key elements of this official strategy include the production of a local car, research into which is already underway. In the coming years, Turkey is set to become one of the few countries with its own brand.

These activities are aimed at improving the R&D, design and branding capabilities of companies, as well as the improvement of legislative and administrative systems and physical infrastructure. With this certificate, Turkey is not only preparing itself for fierce global competition in coming years, but also underlining its commitment to the sector, which will definitely be felt by investors operating in Turkey.

The product portfolio of automotive manufacturers in Turkey covers a wide range of vehicles from sedans to heavy trucks. Taking advantage of its low-cost and highly-skilled workforce, dynamic local market and favorable geographical location, Turkey increased its vehicle production from 374,000 in 2002 to over 1,125,534 units in 2013. During the same period, vehicle production grew annually by 10.53 percent on average.

With this performance, Turkey has become the 16th largest motor vehicle manufacturer in the world. Turkey has already become a center of excellence, particularly with respect to the production of commercial vehicles. By the end of 2013, Turkey was the largest light commercial vehicle producer in Europe.

Auto manufacturers increasingly choose Turkey as a production base for their export sales; around 73 percent of production in Turkey is destined for foreign markets. In 2013, more than 828,000 vehicles were exported from Turkey to different markets. While Germany, France, Italy, Britain, Romania and the USA are the major export customers of the Turkish automotive industry, there is a trend of diversification in export destinations with companies looking to nearby emerging countries where there is considerably more demand potential for new auto sales.

Turkey's strength in the auto industry has been built on its robust domestic demand, which has driven investment in the industry by major international auto manufacturers. Backed by the country's strong economic performance, car sales have shown remarkable growth in the past years. Between 2003 and 2013, the Turkish automotive market grew by 11.48 percent on average (CAGR). 

In 2013, vehicle sales reached 888,571 units. Turkey was the fifth largest automotive market compared with the EU by the end of 2013. Despite strong sales figures, car penetration in Turkey - 165 cars per 1,000 people - is still well behind the European average of 500. This indicates the availability of ample opportunities for carmakers. Increasing purchasing power combined with a low automobile ownership rate will boost automobile sales in coming years.

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