Turkey’s automotive industry, which makes some 80% of its exports to Europe, is now in search of alternative markets as sales to the region begin to drop and are projected to decrease even more.
The semiconductor crisis and the supply problems have been continuing to negatively impact the car industry. A loss of 2.6 million units was seen in global production in the first six months of the year.
Meanwhile, the loss is expected to reach 3.5 million units towards the end of the year.
The rise in raw material prices as well as the record high inflation has been worsening the impact of already existing problems in the sector’s sales.
The global auto sales estimations for 2022 were reduced to 84.3 million units from 89.3 million units. The sales in Europe are showing a particular downward trend as the European consumer is postponing demand for cars due to the rising inflation.
Turkey’s automotive sales to major markets, namely Germany, the United Kingdom, France, Italy and Spain dropped between 11% to 20%.
The sales estimations for the European market, which was 14 million units before, have revised to 12.2 million units.
Automotive Industry Association (OSD) head Cengiz Eroldu, who said that it is necessary to diversify export markets, said: “While there was a 13% contraction in demand in Europe in the first six months, it was 15.4% in June. In addition, inflation in Europe continues to increase. There is also the uneasiness brought about by the Russia-Ukraine war. Expectations of interest rate hikes are among the issues that will reduce demand.”
He said that there is a possibility that the demand in Europe will go down even more.
“That’s why we need to go for new market diversifications.”
Eroldu also touched upon the “Distance Countries Strategy” program announced by the Trade Ministry last week and said, “Critical free trade agreements (FTA) should be accelerated. Supportive policies should be implemented to enter new markets.”
Eroldu added that the domestic market can also be used effectively against the contraction in exports.
The Trade Ministry announced that the FTAs of Lebanon, Sudan and Qatar will enter into force after the completion of the internal approval processes. While Georgia and Malaysia agreements are about to be concluded, deals with Moldova and North Macedonia are about to start. The ministry is conducting FTA negotiations with more than 17 countries.
Commenting on the first six-month results of the auto industry, Eroldu said that the rate of locality in total vehicles is at the level of 45%.
“One of every two vehicles sold in Turkey is domestic production. This is something that is not available in many countries in Europe.”
The Turkish automotive industry had a foreign trade surplus of approximately $9.5 billion in 2021. In the first six months of 2022, this figure stood at $4.5 billion (TL 80.27 billion). A foreign trade surplus of around $9 billion-10 billion is expected at the end of the year.
Turkey’s car exports neared $4.6 billion in the January-June period as the country sold vehicles to 97 countries.
France, Turkey’s second main market in the automotive sector, topped the list of countries in the country’s car exports.
In the first half of the year, exports to France decreased by 30% to $659 million compared to the same period last year.
The second country in Turkey’s passenger car exports was the United Kingdom.
In the January-June period of last year, $395 million worth of passenger cars were sold, while the figure reached $522.78 million in the same period this year.
Passenger car exports to Spain, which ranks third, increased from $405.86 million to $456.7 million.
Turkey’s exports to France, the U.K. and Spain accounted for 35.7% of the country’s total passenger car exports in the January-June period, while Italy and Germany ranked fourth and fifth, respectively.
Automotive output up in H1
Meanwhile, automotive production in Turkey grew 1.5% year-over-year in the first half of 2022, according to new data released on Monday.
Automakers in Turkey manufactured 649,311 vehicles in January-June, including automobiles and commercial vehicles, read a report by the Automotive Manufacturers Association.
Some 72% of all vehicles manufactured were exported, a 1.2% annual rise to 466,995 units.
Turkey generated $15.5 billion from vehicle exports in the six-month period, up 53% from a year ago.
The country’s overall auto sales market shrank by 8.8% on an annual basis to 375,683 units in January-June, the report said.
Passenger car production fell 8% to 382,947 units in the same period.
In June, Turkey’s automotive makers manufactured 135,424 vehicles, a 26.3% surge from a year ago.
Top international automakers – including Ford, Honda, Hyundai, Mercedes, Renault and Toyota – have factories in Turkey, which is one of the world’s top auto sales markets.
dailysabah.com