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The Turkish Automotive Industry

 Motor Vehicle Industry

Turkey is between Europe and Asia and this geographic situation gives the Turkish automotive industry an important strategic advantage and automotive companies from Italy, Germany, France, Japan, USA and S. Korea have important investments. They have export capacity and, especially in crisis periods, this capacity helped them to survive from the crisis with less financial loss. In Turkey production costs are lower, compared to developed EC countries. Turkish automotive industry had begun production in 1950. Today there are 19 companies in production of which 5 are automobile producers and 14 are commercial vehicle producers. In this industry most of the companies have foreign partners and they produce for both domestic and international markets. Since the beginning, production has concentrated on commercial vehicles which have proved particularly competitive.

The automotive industry is one of the four largest exporters, leading investor industries of the Turkish economy. It is an economically strategic sector in terms of its significant contribution to the national production and development, direct and indirect employment and level of technology in Turkey. It provides employment for more than 500,000 people with related sub sectors and attracts foreign investors.

In the 1960s, the first steps were taken towards establishing an automotive industry with the aim of “import substitution,” and ever since it has been closely integrated with the EU automotive industry.

In the beginning of the 1990s, the fact that the demand, especially for passenger cars, was on an upward trend and reached a consistent 25 percent annually, resulted in heavy investment in the motor vehicle and parts and component industries. It was during this time that rapid steps were taken in the areas of capacity increase, in addition to renewed technology and investments in new models geared especially towards competition, as well as in the areas of research and development. It was also during this time that contemporary manufacturing techniques were implemented following intense training programmes as well as the establishment of quality management systems enabling these firms to obtain international certification, such as ISO.

During the ‘90s it became necessary for the industry to protect its market share by manufacturing new models of vehicles and importing models not manufactured in Turkey. Since the beginning of the 1990s incentives have been provided to invest in the manufacturing of new, current model vehicles. During this period, the importing of technology and foreign capital partnerships were made easier and supported. Contemporary manufacturing techniques were applied after intense training programmes, especially through the establishment of quality management systems.

As a result, foreign partners included their facilities in Turkey within their own global strategic development projects. This process enabled facilities in Turkey to manufacture goods for sale in international markets across the world. Thanks to its intense efforts during the past 5 years, the Turkish automotive industry has pursued its adaptation to the relevant technical regulations and has established an efficient and exemplary co-operation with public institutions in the transformation of the EU regulations to national regulations and their implementation.

There are 16 companies producing passenger cars & commercial vehicles of all kinds and farm tractors. These are all private, large scale enterprises and operating under foreign licenses and/or share holders with the multinational companies. Total installed capacity of the industry is around 812,000 units/year of which about 78% are 635,000 passenger cars and 22% commercial vehicles.

With intense world wide competition, each year firms now introduce new models or face lifts on existing models to the Turkish market simultaneously with global launches. Within the various segments of the Turkish market, a total of approximately 130 different brand/model passenger cars are now being supplied.

The number of passenger cars per person in Turkey is still lower than international figures. In 1999, while the world average and the EU average per 1,000 persons was 88 and 476 respectively, in Turkey this figure was around 62. This is a clear indicator that there exists a large potential market for passenger cars in Turkey, auguring well for the long term growth of the industry.

So far this century, the Turkish automotive industry has been focusing on export. In 2002 and with exports amounting to US$ 5 billion, the automotive industry ranked second in the Turkish export ratings. A target of US$ 7.5 billion has been set for 2005 which would make it the number one exporting industry.

Turkey is approaching the point where 500,000 vehicles can be exported annually. Thus foreign partners have begun to view their facilities in Turkey as their production centre for the global market and already impressive volumes are being exported to a number of Middle East countries. In the near future, Turkey will be the centre of manufacturing for passenger cars & commercial vehicles in the region with production volumes of 80,000 – 120,000 p.a..

The manufacturing methods and techniques used within the Turkish automotive industry are to international standards. Technology investment in the industry is rapid and continuous. This feature of the industry is also creating the foundation of technological development in Turkey.

Turkey is the only country within the surrounding geographical area to have established a well-advanced automotive industry. Therefore, the automotive industry is strategically important both for Turkey and for firms that will invest in Turkey. Turkish automotive industry has already proven to export to EU, every kind of automotive product with:

bullet850,000 modern vehicle production capacity
bulletDeveloped competitive component supply industry
bulletYoung, educated and motivated man-power
bulletEntrepreneurs ambitious to succeed
bulletGlobal multinational shareholders

Parts and Components Industry

In the beginning of the 1990s, the rapidly increasing world demand for motor vehicles resulted in significantly increased investment in the Turkish parts and components industry. Development continued apace until now the Turkish automotive parts and components industry has reached a level where it can answer the need for the vast majority of items  for the necessary parts and components of the vehicles manufactured in required for locally manufactured vehicles.

Due to the high export potential and Turkey’s regional advantages, foreign capital has been showing an increasing interest in the automotive parts and components industry in Turkey. By 2002 and with European Union companies in the lead, there were 185 foreign company partnerships in the industry.

Consequently, exports have also expanded until now direct exports exceed US $3 billion of which around 70% go to Europe.

Thus Turkey is rapidly becoming an alternative supplier centre due to its reasonable costs and efficiency of production which, in turn, encourage further investment.

Turkish companies in this sector have been steadily improving the quality of their products, management and employees, and making advances in their cost and delivery processes, all in order to be able to compete with global competitors.

The Turkish automotive parts and components industry has now developed to the stage where it is at a level ready to take advantage of the globalisation and structural changes in the world automotive industry. A number of firms active in the industry have been named the “co-designer” in the global vehicles manufactured in Turkey. These firms have also reached the stage where they act as “co-designer” for the global production of motor vehicle manufacturers.

Investment

Some of the many factors which attracted world manufacturers to invest in Turkey include:

bulletMarket size,
bulletConsumer / customer composition,
bulletFriendly investment law,
bulletLiberal banking system,
bulletEU laws which have been harmonised into the Turkish system (fair competition, patents etc.),
bulletNo barriers in movement of capital from Turkey to other countries,
bulletEstablished base,
bulletAdopted legislation in line with international rules of free trade within the context of Customs union and WTO,
bulletNot yet saturated domestic market with high potential,
bulletEasy access to neighbouring (regional) emerging markets,
bulletHighly skilled human resources in production and management,
bulletComplementary level of MVI technology and industrial experience and
bulletLow labour cost and culture of productivity.

Opportunities for foreign investors to do business with Turkish automotive suppliers industry include:

bullet

Sourcing components from Turkish suppliers - particularly viable for aftermarket and 1st Tier Suppliers

bullet

Joint production development for world car models

bullet

R & D and testing houses

bullet

Technology transfer

bullet

Electronics - Diagnostics

bullet

Safety (air bags, side protection systems)

bullet

Lighting (HID - Xenon)

bullet

Security (theft protection devices)

bullet

Comfort (smart seating)

bullet

Audio / Navigation

bullet

Larger and sophisticated moulds (moulds for PC polycarbonate material for headlamp glass, multi-colour stop lamp glass or radiator boilers, gas tanks )

Around 100 major component manufacturers from Europe and other countries have close ties with Turkish producers via joint ventures. At present the local parts and components production includes:

bullet

Casting

bulletAuto glasses
bullet

Forging

bulletSeating and inner trimming and safety components
bullet

Engines

bulletSuspension systems
bullet

Power-train parts and components

bulletFixings
bullet

Electrical equipment

bulletVarious plastics parts
bullet

Brake and clutch parts and components

bulletVarious aluminium parts
bullet

Hydraulic and pneumatic systems

bullet Batteries
bullet

Body panels

bullet Chassis frame and parts

Total exports of the Turkish supplier industry are now realising over US$1,9 billion, destined for 155 countries. Companies are supplying major European producers such as GM, VW and Ford. 

Of the total Automotive exports from Turkey, 69% are destined for the EU and leading importing countries are France, Germany, Italy and UK.

Due to the high export potential and regional advantages of Turkey, foreign capital is now showing an increasing interest in the automotive suppliers industry in Turkey.

As of 2002, there were 185 foreign company partnerships in the industry, most of which are with the European Union companies.

Of the total Automotive exports from Turkey, 69% are destined for the EU and leading importing countries are France, Germany, Italy and UK.

Of the total Automotive exports from Turkey, 69% are destined for the EU and leading importing countries are France, Germany, Italy and UK.

Due to the high export potential and regional advantages of Turkey, foreign capital is now showing an increasing interest in the automotive suppliers industry in Turkey.

Fiat, Ford, General Motors, and Renault are all taking advantage of its proximity to high-growth markets and low labour costs. Substantial export-orientated investments have placed local manufacturers in the perfect position to attack regional markets.

Turkey will soon reach an annual vehicle export capacity of over 500,000 units. Also in the near future, Turkey will be the world ‘s alternative production centre of vehicle and parts, and the automotive sector will become one of the leading sectors of the manufacturing industry, with exports of $8-8.5 billion.

Some of the features which make the automotive sector in Turkey so strong and will ensure that it will still be one of the production centres in the future in a sector that is fast becoming global, are as follows:

bullet

Has the potential to develop competitive power in compliance with the globalisation process

bullet

Is located in a strategic geographical position in the context of proximity to developed and developing markets

bullet

Has sufficient and qualified production capacity

bullet

Technological infrastructure of the sector is at an international level

bullet

Has a strong supplier industry in compliance with global standards that can produce at required specifications

bullet

International quality management systems are implemented

bullet

Is in compliance with international technical regulations

bullet

Can achieve full integration with foreign partners

bullet

Has well-educated, entrepreneurial, dynamic, and qualified human resources

bullet

Has competitive labour costs

bullet

Information technologies are in widespread use

bullet

Continuously develops R&D potential

bullet

Continuously invests in technology

bullet

Export experience is enhanced with each passing year

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