Chinese automobile brands, which have rapidly increased their sales in the domestic market, have been hit by a harsh tax increase. Following the new regulation, Chinese companies signaled that they would speed up the manufacturing process in Turkey.
Chinese automobile brands, which increased their share in the Turkish market to 10 percent with record sales, faced high tax rates as they prioritized European countries in factory investments. With the decree published in the Official Gazette, the 40 percent additional customs duty previously imposed on Chinese-origin electric vehicles will apply to cars of all fuel types as of July 8. After the decision, Chinese brands reconsidered their supply and pricing plans and signaled that they will accelerate the process regarding their production plans in Turkey.
With the decree published in the Official Gazette on June 8, the customs duty will be extended to all fuel types, while the lowest customs duty will be applied at $7 thousand. The Ministry of Trade announced that the decision aimed to ensure the declining local share in the domestic market rises again and to encourage factory investments.
While the number of Chinese brands selling in Turkey exceeded 10, these brands increased their share in the total market to nearly 10 percent with nearly 40 thousand vehicles sold in the first 5 months of 2024. Chery had the highest share in sales in the first 5 months with 27 thousand units sold. Leaving some domestic brands behind, Chery became the third brand with the highest sales in May.
It is stated that when VAT and SCT are added to this 40 percent additional customs duty on top of the current 10 percent tax, the prices of Chinese cars may increase by more than 700 thousand TL, depending on the model. This situation has caused brands to reconsider their production plans for Turkey.
Chery will speed up the process
Chery, which became the Chinese brand with the highest sales in Turkey, chose Spain for its first factory in the EU. Then, the brand’s global executives signaled that they did not rule out Turkey. Commenting on the new tax regulation that will enter into force on July 8, Si Fenghuo, President of Chery Turkey, said, “We respect the government’s decision on tax regulation. Considering the current situation, we are working intensively on the feasibility analysis of factory construction in Turkey and production in Turkey together with the relevant ministries, while working to adapt to the changes made on the one hand. We are endeavoring to realize production in Turkey as soon as possible.”
MG is at the letter of intent stage
Kagan Dagtekin, CEO of Dogan Trend Otomotiv, the Turkish representative of MG, which is planning to invest in Turkey, said: “MG management has officially announced that they will establish production facilities in Europe to continue their development in Europe. As Dogan Trend, we are working to ensure that the first of the planned facilities in Europe will be in Turkey. We have reached the stage of signing a letter of intent with MG last week. However, it should be clearly known that investment decision-making is a long process and it is not right to speak definitively beyond wishes. Our main priority now is to accelerate production work.”
Mahmut Ulubaş, CEO of Skywell Turkey, also stated, “We have evaluated the related news with Skyworth Group and are continuing our negotiations at the ministry level, taking into account both the tax policy in Turkey and the possible customs duty changes in Europe.”
BYD had also decided to make its first investment in the EU in Hungary. BYD also sees Turkey as an option for its second factory in Europe. However, it is not yet known how the new regulation will shape BYD’s decision.
Chinese vehicle sales accelerate this month
Hüsamettin Yalçın, CEO of automotive data and analysis company Cardata, stated that with the new tax regulation coming into force on July 8, the prices of Chinese brands will increase significantly and said, “The vehicles in stock before this date are expected to be sold quickly. Big campaigns can be organized to melt the stocks and record sales can be seen in this process. However, it is also possible that sales will drop significantly after July 8.” Yalçın stated that the additional tax may cause an increase in the prices of second-hand Chinese origin vehicles and said, “We expect a price increase of 10-15 percent in the second-hand market. This may encourage consumers to turn to second-hand vehicles.”
