The danger bells are ringing in the automotive industry, one of Turkey’s locomotive sectors. Unable to attract a new brand investment from Europe, the Turkish automotive industry received the first bad news from Chinese automotive manufacturers, on which it had pinned its hopes to maintain its production power.
China’s Great Wall, which was planning to invest in Turkey, suspended its investment decision, citing frequently changing regulations and increasing labor costs. Other Chinese automotive brands that want to invest in Turkey are waiting for ‘guarantees and attractive incentives’.
According to the information obtained by the EKONOMİ newspaper, Great Wall, one of the Chinese brands for which intensive public contacts were carried out to invest in Turkey, reported last Thursday that it suspended its investment decision in the country. Frequent changes in regulations and rising labor costs also played a role in this decision, while other brands such as Chery, Skywell and MG, which are planning to invest, continue their negotiations. However, these brands are waiting for “guarantees” and attractive incentives to invest in Turkey instead of the European countries they are invited to. The government, which imposed various additional taxes on vehicles imported from China, had imposed a number of conditions on electric vehicles from this country, such as the obligation to establish at least 20 service points in 7 different regions with a recent communiqué.
On the other hand, in the sector, where a 35 percent contraction is predicted at the end of the year, the decline in production and exports has already begun.
China, which embarked on an aggressive growth spurt in the global automotive market, overtook Japan and became the world’s largest automobile exporter. Chinese brands, which started sales in Turkey one after another, started a rapid rise in the domestic market by taking share from domestic producers. Parallel to this development, the Turkish automotive industry posted a foreign trade deficit in 2023 for the first time in years. Local industrialists, who do not see an escape from China’s aggressive growth as possible, see the production of Far Eastern competitors in Turkey as the only way out.
This issue has also become an important agenda item for the public sector. On the one hand, government officials have signed various legal regulations to slow down imports from China, while on the other hand, they have been conducting intensive contacts to encourage Chinese brands to invest in factories in Turkey. Although the relevant ministry officials have made statements that the negotiations with Chinese brands are progressing positively, it will not be that easy to attract these investments to Turkey. Because while many EU countries are also trying to convince the Chinese to invest in their countries, production costs in Turkey are increasing.
Which Chinese brands did Turkey sit down with for investment?
In 2021, after China’s largest automotive manufacturer SAIC, which entered the Turkish market with the MG brand under the distributorship of Dogan Trend Otomotiv, Skywell and Great Wall Motors took action to invest in Turkey, and EKONOMİ newspaper announced the details of the meeting with the Presidential Investment Agency for the first time. Then, the officials of Chery, which has gained an important place in the Turkish automotive market and a significant share in sales, announced their willingness to invest in Turkey and started negotiations with government officials.
“WE ARE IN A RACE WITH COUNTRIES LIKE GERMANY AND FRANCE TO ATTRACT INVESTMENT”
Skywell makes appointment for incentive details
* The brand that took the most concrete step to invest in Turkey was Skywell, which sells in Turkey under the distributorship of Ulu Motor. Mahmut Ulubaş, CEO of Skywell Turkey, had officially announced plans to establish a factory for the production of battery electric vehicles in Turkey last December. He had also established a team by entering the Informatics Valley, which completed the feasibility studies. According to information from sources close to the brand, Skywell officials will meet with relevant ministry officials tomorrow (Tuesday) to discuss possible incentives. The Chinese brand will take faster action if the incentives meet its expectations.
Chery received a letter of intent last week
* According to other information provided by industry sources, ministry officials gave a letter of intent to Chery officials last week. The letter listed the incentives that would be offered to Chery if it invested in Turkey.
BYD chose Hungary
* Chinese BYD, which entered the European and Turkish markets last year, had not put factory investment in Turkey on its agenda. However, the fact that the brand has chosen Hungary for its new electric vehicle factory in December 2023 makes Turkey’s expectations in this regard almost impossible.
MG negotiates with EU countries as well
* Speaking at MG’s press conference last Friday, Doğan Trend Otomotiv CEO Kağan Dagtekin also made a statement about SAIC’s plans to manufacture in Turkey: “We have been working on this issue for the last two years at an increasing pace. In the last three months, it has accelerated a bit more and we are striving to establish one of SAIC’s factories, one of its production facilities in Turkey. Beyond that, it would be a bit speculative to say anything positive or negative, but there is nothing negative going on.” Underlining that Turkey is not the only alternative for investment and that they are in competition with European countries, Dagtekin said, “The Chinese are pressing their feet to the ground with their strategies in Europe. They are interested in Turkey, but we are not alone. There are big countries we know in this race, such as Germany and France. We are in competition with these countries to get this investment. We are also in competition with countries in Eastern Europe that want to turn into an automotive production center with very aggressive support.”
“Two weeks ago, a high-level delegation was in Turkey. We visited the Minister of Industry and the Investment Office of the Presidency of the Republic of Turkey. Thanks to Mr. Albert, President of TAYSAD, we took special care and hosted the guests well, and we showed them around different factories and sub-industry facilities in the Bursa region. Our willingness and position as Doğan Group on this issue is already clear. We know that they are impressed by Turkey’s capacities, not from presentations, but from their own visits, but the process is ongoing and we will not give up. I believe that sooner or later the SAIC brand will also establish a plant in Turkey.” Dagtekin said.
According to some sector representatives we interviewed, the fact that MG has its own companies in Hungary and the Netherlands creates a disadvantage for Turkey to attract this investment.
Hozon Neta also lists Turkey as a candidate for investment
* Hozon Neta, one of China’s new generation automobile manufacturers, started its operations in Turkey last week. The recently announced compact SUV model of the brand, which opened the doors of the first showroom with the GRS Automobility facility in Kağıthane, Istanbul, was also put on sale. Giving important information about the brand, GRS Automobility General Manager Vedat Uygun stated that their work in the field continues at full speed within the scope of the new regulation, “Hozon Neta will enter the European market in the second quarter of the year within the framework of its global strategies. Our country is considered as a strong production base for the large European market and is seen as an important candidate for production investment.”
Automobile production down 5%, exports down 13
Turkey’s automotive industry, which closed last year with record domestic market sales and exports, started 2024 on a bad note. According to the data announced by the Automotive Industry Association (OSD) the previous day, total automotive production in January decreased by 3 percent compared to the same period last year and amounted to 108 thousand units, while automobile production fell by about 5 percent in this period and remained at 67.5 thousand units. In January 2024, automotive exports decreased by 5 percent in terms of units compared to the same month of the previous year to 75 thousand 106, while automobile exports decreased by 13 percent to 44 thousand 437. Speaking to EKONOMİ, Baran Çelik, President of the Automotive Industry Exporters’ Association (OİB), said, “Although there is not a very significant decrease in exports for the moment, in the coming months, depending on the increase in costs, inflation and the exchange rate, loss of competition will be inevitable. And this will bring us face to face with the risk of a decrease in annual production.”
35 percent contraction expected in 2024
Last year, more than 1 million cars and light commercial vehicles were sold in Turkey, breaking an all-time record. Although the increasing demand for SCT-exempt vehicle sales in the domestic market and the concern that prices will increase after the elections kept sales alive in the first two months of the year, sector officials predict a contraction of up to 35 percent at the end of the year due to high inflation and difficulties in accessing financing. Automotive sector representatives predict that the sales momentum for vehicles for the disabled continued in February and that the contraction in the domestic market will first be felt in March.