Turkish Automotive HistoryTheOttomanPeriod:

Cars and automotive-related developments have begun in the last period of the Ottoman Empire. The first car in Istanbul was during the ruling period of Sultan Abdul Hamid (1876-1909) and seen at Beyoglu-Istiklal Avenue, just on display in a shop for months and it was thet arget of the gaze of curious people of Istanbul. However, in the Ottoman archives, some letters and documents found recently, Show that the first "electrical" car, manufactured by an English, Robert Davidson, was ordered by Sultan Abdul Hamid, in 1888 and the car imported from England. Due to bomb placed under the car of Sultan Abdul Hamid, it was not allowed to import any kind of motor vehicle until the end of his reign(1909).

The first gasoline-powered car in Istanbul, was at the time of Galata quay opening in 1895, and imported byAhmed Pasha, a member of the State Council, where the first public debut of the Renault-Landaulet  brand car, with its opening and closing the rear blower, was in the district of Fenerbahçe at Kalamis-Istanbul.

At theOttoman period, the transport industry has developed around Sarachane district of Istanbul. The first major initiative for industrial and technical schools were established during Mithat Pasha period who, later established an on-site factory. At that time, the technology and science graduates from schools with a high degree of education, were sent to Europe, and have contributed to the Development of the Automotive Industry.

After realizing the military importance of the automotive industry, military trucks began to be imported. Having realized the importance of national initiatives anddevelopments in the automotive industry, followed one another. In 1916, the establishment of the Ottoman Transportation Company, has an important place in the development of the automotive industry in our country.

Republican Period:

After the establishment of the Turkish Republic, the Government to revive the port of Istanbul between 1927-1928, has supported the establishment of free trade zone and as a result, a 25-year agreement was signed with the Ford Motor Company. In Tophane District, 450 employees began working with Ford Motor Company. In 1931, 48 daily produced trucks and cars had began to be exported. However, with the economic crisis of the 1930s, it came to the end. Unfortunately, very few visual material could be obtained for this factory.

Such as the conversion of imported vans minibuses bright future of the automotive industry had shown that retrofits. In 1952, foreign industrialists began to come to Turkey to sign partnership agreements with the local industrialists.

In 1954, Jeep models were suitable for use in agriculture for the production and the Turkish Willys Overland Jeep Factory   was established at Tuzla in Turkey and Büssingtrucks with military jeeps and vans were crafted.Commercial truck production was started in 1955. Founded in 1955, the staff of the Federal Turkey Trucks Inc. At Çayırova Federal Assembly and began to manufacture trucks with thebrand.Otosan; Ford Motor Company and Koç Group in 1959, was established at the initiative of the first steps have been taken in terms of automobile production-oriented investments.The Otosan factory in Turkey in 1960 was working with Ford Thames truck production together with Ford Consul car and light commercial vehicle Ford Transit went into production in 1967.

In 1962, the Federal Turkey Trucks Inc has been aquired by OYAK Inc. in partnership with the International Harvester Truck, Bus, Minibus, Tractor, Truck, Pick-Up and Reo Military Vehicles by brand chassis, radiator, gas tank, and the framebuffer, which will produce intermediate material (TOE Turkish Automotive Industry) was founded.In 1963, the Bus Body Co., Ltd. Magirus buses started to be realized by the installation.

Period in 1961 by order of President Cemal Gursel Eskisehir State Railways Plant in Turkey by Turkish engineers completely designed and produced the first car developed at the request of the revolution but he also was named to the vehicle: Devrim (Revolution). At that time, 135 days, in a country that cannot produce even a needle, was a very short time with extremely limited resources, such as the Turkish-made car completely developed, that four units were produced for the three different types of automobiles manufactured. The declaration of the engineers was as follows:" The Turks can not produce cars! "Mentality refuted, thinking back has been defeated. We can assert that the more robust of the Revolution, the investment is no longer a matter of making more beautiful. To decide this issue in the government  encourage us to see. Constructive criticism is always ready. There is no personal stake in it. Our goal is to our develop the country. The Great Turkish People to appreciate... ".“Devrim” deserved the same attention to invest in car, unfortunately, could not see and did not go to mass production. However, the private sector and encouraging them has fueled the idea of car manufacturing.Otosan, by the year 1966, prepared by the British Reliant company and, in principle prototype fiberglass-bodied two-door, all the mechanical parts from Ford, the automobile Anadol name began to produce a result of a competition.In 1968 , Koç Group made their second automotive investment with Italian Fiat S.p.a., TOFAŞ which started in 1971 with the production of Murat 124 (Fiat 124). The production of Murat 131 (Fiat 131 in 1971 strated and continued with the various types of 131.)In 1969, OYAK has made a joint-venture with French Renault, OYAK-RENAULT, and started the production of Renault 12 in 1971.In 1987, Turkey's first hatchback model, the Renault 11 bands out and the first diesel engine installed in the Anadol Pick-up by Otosan.TOE in 1993 and Genoto factories in 1995 have been closed down.In 1997, as the first domestic production of the Honda Civic and Hyundai Accent production appeared.

As of today, apart from the above mentioned companies, the following automotive factories, member of OSD (Automotive Producers Association of Turkey) are the main producers in Turkey:  

         Anadolu-ISUZU          Hyundai-ASSAN          OYAK-Renault         B.M.C          Karsan          TEMSA-Mitsubishi         FORD          M.A.N          TOFAŞ         Hattat          Mercedes Benz          Toyota         Honda          Otokar Türk Traktör

(http://www.anadolturkey.com/web/en/aboutanadol/history/turkototarih.html)

Investment Spending in Automotive Industry in Turkey:

RealizedSectorialInvestments (USD)Projects 2010 2011 2012 2013 2014

Capacity Development 40.000.000 44.000.000 130.000.000 142.000.000 150.000.000Modernization 50.000.000 61.000.000 113.000.000 75.000.000 60.000.000

New Model Development 366.000.000 430.000.000 723.000.000 855.000.000 1.000.000.000Quality Development 12.000.000 16.000.000 46.000.000 30.000.000 26.000.000

Localization 11.000.000 70.000.000 23.000.000 3.000.000 8.000.000Others 72.000.000 125.000.000 80.000.000 95.000.000 130.000.000Total 551.000.000 746.000.000 1.115.000.000 1.200.000.000 1.374.000.000

Kaynak: OSDThe table shows investment spendings in Automotive Industry between 2010 and 2014 in Turkey. As we saw from the table, from 2010 to 2014, total investments approximately tripled. Also, if it is necessary to look at item by item, first of all, investment in Capacity Development had a stable increase for 4 years. It rise from 40 million USD to 150 million USD. Modernization is another important item and it increased until 2012. By year 2012, investment fell for 2 years, 2013 and 2014. New Model Development is the most important concept and the bigges tinvestments were made to develop new models. Investment in New Model Development had been a strong increase year by year. The spending was 366 million USD in 2010 and it went up from 366 million USD to 1 billion USD from 2010 to 2014. Moreover, the reare investments for Quality Development, Localization and Others, but they have small place in the investment spendings accordingly other three.

Total Employment in Automotive Industry in Turkey :

If we look firms’ total labour employed in the automotive industry, It’s very stable level between 2010-2015. Only very small changes have been mentioned each year. When we look as the category, we can see that the engineer employement has the highest increases in 2014. This type of employement has a very significant effect. For example; reducing unemployement and providing ‘producing country’. Turkey often produced products within the borders of the country by made agreements and partnerships with foreign manufacturers. This foreign capital leads to a movement into the country. Development needs of automotive sector is unlimited. Therefore, new investments in this industry will increase today’s labor employed even more in the future.

Total Employment From All Firms2010 2011 2012 2013 2014 2015

Worker 32.220 35.274 34.681 32.331 33.238 34.368Employee 3.513 4.250 3.835 3.777 3.893 4.025

Administrator 476 546 776 590 458 473Engineer 3.393 3.480 3.958 4.191 4.481 4.633

Administrator Engineer 1.236 1.346 1.405 1.441 1.613 1.668Total 40.838 44.896 44.655 42.330 43.683 45.167

Kaynak : OSD

The table shows number of workers. They works of Turkey’s automobile manufacturers between 2010 and 2015. In the list, there are five line of work. We can see that, workers have basis of the automotive industry. Employement of workers are more than 70% in automotive industry. Total number of employement fluactuated every year but it was increased by approximately 11% between 2010 and 2015. In the table, Engineer and Administrator Engineer have a steady increment. Engineer employement improved by 36,5% and Administrator Engineer employement improved by approximately 35%.

Production, Export and Import:

Production, Export and Import(Unit)2010 2011 2012 2013 2014 2015

Production 1.124.9821.234.63

7 1.115.2331.166.04

3 1.218.848 1.410.034Export 763.670 801.112 745.354 843.467 902.194 1.007.267Import 465.408 538.532 511.694 615.609 522.842 658.690

2010 2011 2012 2013 2014 20150

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Export and Import

Export Import

Kaynak : OSD

The table shows production, export and import of the automotive industry in Turkey between 2010 and 2015. The production, export and import of motor vehicle in Turkey fluctuated between 2010 and 2015. In Turkey, the production was always around 1 million vehicle between 2010 and 2015. The production went between 1.124.000 vehicle and 1.410.000 million vehicle between 2010 and 2015. Also export and import fluctuated between theese years. After 2012 export started to increase and ıt reached to 1 million units in 2015. Export increased by approximately 16%.

OTOMOTİV DIŞ TİCARETİ

The automotive sector has an important place in world trade. Especially in the last decade, it is observed that the decrease of the share in the total foreign trade volume of this group. This rate of 10.4 percent in 1996, fell to 7.7 percent in 2012, it occupies an important place as the sector's impact in the crisis year 2008 takes.

2008 global economic crisis that affecting negatively Turkey's main trade partners, has led to a reduction in our automotive exports. Reaching the highest export value of 18.3 billion US dollars in 2008 with the date of Turkey's automotive industry exports in 2009 declined to $ 12.3 billion. But the effects of the global crisis on the automotive sector is not permanent. The industry, in emerging from the crisis began with 12.7 percent and 14.4 percent respectively in 2010 and 2011 export exchange rate.

The automotive industry is an important sector in terms of Turkey's foreign trade balance.According to 2014 data of Turkey Exporters Assembly ,automotive sector which is the sector where most of Turkey's exports, performs 14.1 percent of total exports. The sector which began to increase the weight in the second half of the 1990s exports , accelerate the rise in the period after the 2001 crisis. Aforementioned rise is continued until the 2008 global crisis.

Export according to types in terms of dollar :

Types 2010 2011 2012 2013 2014Passenger Car 5.100.281.905 5.289.921.692 4.773.273.240 5.589.014.235 6.641.451.814

Truck 166.523.409 238.457.284 188.722.464 191.767.361 86.162.810PickUp 4.259.641.966 4.994.360.768 4.462.472.072 4.516.972.999 4.142.147.105

Bus 694.535.225 844.773.764 787.872.937 742.396.441 911.108.347Minibus 227.391.269 360.950.511 308.654.809 666.073.004 533.962.510Midibus 56.923.573 47.832.717 71.772.844 71.821.187 71.981.503Tractor 176.043.967 205.861.160 312.921.170 336.685.280 432.620.584

SparePart 790.159.387 1.028.788.578 1.162.358.056 1.219.458.507 939.320.863

Total 11.471.500.701 13.010.946.47412.068.047.59

2 13.334.189.014 13.758.755.536Kaynak : OSD

The vehicles sector in Turkey has become one of the most exports of Turkey by constantly increasing its export since 2005. While the exports of vehicles USD 13 billion in 2011, the figure of $ 12 billion in 2012, $ 13.3 billion in 2013 and $ 13.7 billion in 2014, has reached. Due to the effects of the global economic crisis year 2009, was $ 9.6 billion due to the contraction in exports to the EU market.

Automotive sub-industry export for the first time exceeded US $ 1 billion in 1998, it has reached $ 4.3 billion in 2006. In 2008 It has reached 6,4 $ billion. The impact of the crisis, exports in 2009 receded $4.6 billion. However, from 2010 onwards it started to increase exports, which in 2011 reached 13 billion dollars. In 2010 the value of exports of the automotive industry on the basis of 75% to European Union countries was carried out. Exports did not change much higher in 2010 that caused by not much change in the table but it has reached 11 billion US dollars. In 2011, when the conditions showed relative improvement, the amount of exports reached in 13 billion dollars. The automotive industry,

which is shipped the product for global brands with zero error, exports its products to companies not only for the main industrial enterprises in Turkey,but also in the EU countries.

In the years between 2007-2010 in the Turkish automotive sector is a net exporter country also Turkey is net importer in 2011. In 2014 the value of exports of the automotive industry on the basis of 72% to European Union countries was carried out. A large scale of remaining exports are performed to Eastern European countries, NAFTA and EFTA countries.

Exports According to Brands: (in units)

Export Of member Companies (Unit)Companies 2013 2014 2015

OYAK RENAULT 266.508 257.992 270.299FORD OTOSAN 208.722 187.921 252.571

HYUNDAI ASSAN 85.500 179.793 201.276TOFAŞ 160.309 142.234 173.743

TOYOTA 86.908 109.517 81.962TÜRK TRAKTÖR 14.402 15.866 14.122M. BENZ TÜRK 5.331 3.438 4.252

KARSAN 10.120 37 3.067HONDA TÜRKİYE 2.121 1.560 2.220

MAN TÜRKİYE 898 937 1.493HATTAT TARIM 594 1.148 810

OTOKAR 620 580 720TEMSA GLOBAL 663 423 441

A.I.O.S 770 748 291BMC 1 0 0

TOTAL 843.467 902.194 1.007.267Kaynak: OSD

VehicleExport in Unit

Motor VehiclesExport in UnitsTypes 2011 2012 2013 2014 2015

Passenger Car 442,674 412,991 484.504 581.993 604.683PickUp 319,366 292,601 300.765 269.995 341.834

Minibus 20,163 16,429 34.664 26.458 38.255Truck 3,912 2,682 3.055 1.281 1.408

Midibus 647 1,173 985 824 447Bus 4,204 4,047 4.498 4.629 5.708

Tractor 10,146 15,431 14.996 17.014 14.932Total 801,112 745,354 843.467 902.194 1.007.267

Kaynak : OSD

Both tables show us the main exporter brands and the types of the exported motor vehicle numbers. It is seen that export units has a constant increment between 2013 and 2015. Total export units increased by approximately 19,5% between 2013 and 2015 and reached 1.007.267 units in 2015. This shows that the demand for automobiles has gone up. There are five brands for mostly exported automotive. These are Oyak Renault, Ford Otosan, Tofaş, Toyota and Hyundai Assan. Especially Oyak Renault is the leader exporter. It was exported totaly 794,799 units car between 2013 and 2015. When we look the second table; It shows that types of cars. The export of motor vehicle in Turkey fluctuated between 2011 and 2015. Passenger cars and Pic Ups were the mostly exported types of cars between 2011 and 2015. Passenger cars has the highest rate in types of exported motor vehicle. Approximately 4,3 million cars exported between 2011 and 2015. However, more than 2,5 million passenger cars exported and it means that exported passenger cars is the mostly exported (more than 50%) car type between 2011 and 2015.

Total Component and Vehicle Industry Export in terms of dollars :

Kaynak : OSD ve Otomotiv Endüstrisi İhracatçıları Birliği

ExportfromTurkeytoOtherRegion :

Kaynak : Comtrade Veri Tabanı

This graph shows us the export from Turkey to other region. Turkey exports cars mainly these 7 region. Especially, Western Europe is the largest export partner between these 7 region. Turkey’s export volume was over the $6 billion in 2010 and end of the 2013 it was reached more than $7 billion. We can see that export volume was fluctuated between 2010

and 2014. Turkey’s total car exports decrease to approximately $5,5 billion in 2012. After this year it started to increase. Turkey’s export volume to Europe was $5,2 billion in 2010. At the end of the 2013 Turkey’s export volume to Europe reached more than $6 billion. It means that Turkey exports its cars mainly to Europe.

Import from Other Region toTurkey :

Kaynak : ComTrade Veri Tabanı

This graph shows us the import from other region to Turkey. Import was fluctuated between 2010 and 2014. Turkey import cars mostly from Europe. Turkey import cars 80% from Europe, 14% from Eastern Asia, 4% from America and the rest 2% from Southern Asia.

Import volume with Europe was over the $5 billion in 2010 and at the end of the 2013 it was reached more than $7 billion but import from europe decreased to $6,2 billion in 2014. Total import decreased to $7,3 billion. Therefore, we can say that Turkey started to produce more cars after 2013 and didn’t need car import.

Production and Capacity Usage:

Types 2010 2011 2012 2013 2014 2015Passenger Car 603.394 639.734 577.296 633.604 733.439 791.027

Truck 23.851 37.396 29.129 30.068 29.909 35.838PickUp 442.408 479.110 426.633 410.556 359.911 468.933

Bus 5.268 6.907 6.427 8.345 6.442 8.789Minibus 16.978 22.475 29.335 37.750 35.420 47.078Midibus 2.658 3.509 4.158 5.197 5.324 7.131Tractor 30.425 45.506 42.255 40.509 48.403 51.238

Total 1.124.9821.234.63

7 1.115.2331.166.04

3 1.218.848 1.410.034CapacityUsage 72% 76% 68% 73% 70% 80%

2010 2011 2012 2013 2014 20150

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

62%

64%

66%

68%

70%

72%

74%

76%

78%

80%

82%

Production and Capacity Usage

Production Capacity Usage

Kaynak : OSD

This table shows that total production and capacity usage between 2010 and 2015 in Turkey. In the table, production fluactuated until 2012. However, after 2012 production started to increase and it caught stable increment. Total production increased by 25,4% between 2010 and 2015. We can see Passenger Cars and Pick Ups mostly produced car type in every year and Passenger Cars has the highest production rate. Also we can see that Midibus production increased every year but it constituted smallest production. However, Turkish car producer could not use their production capacity 100%.Capacity usage was 72% in 2010 and it increased to 76% in 2011 but, it decreased by 8% in 2012. Capacity usage plumb the depths in 2012. Production increased to 1,2 million in but capacity usage decreased to 70% in 2014. Production has made the greatest growing in 2015, it was reached to 1,4 million cars and also capacity usage increased to 80%.

2015 Üretim Kapasiteleri

In Turkey there are 12 OEMs producing over 1 million units of vehicles yearly. Turkey has installed capacity of ~1.5 million in PC & CV segments. Hyundai, Ford, Tofaş and Renault produce more than other brands. Mercedes has two place of production; first one produce passenger car in İstanbul and second one produce commercial vehicle in Aksaray. Also Ford Otosan has two place for production. Car manufacturers mostly built production place Marmara and Central Anatolia region because easy to transport, overpopulation, easy to find employement and these 2 region’s industry is better than other 5 region.

Sales in Turkey:

SALES IN TURKEYPassenger Car Commercial Vehicle Total

2010 509.784 251.129 760.9132011 593.519 270.920 864.439

2012 556.280 221.481 777.7612013 664.655 188.723 853.3782014 587.331 180.350 767.6812015 725.596 242.421 968.017

2010 2011 2012 2013 2014 20150

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000Sales

Passenger Car Commercial Vehicle

Kaynak:ODD

In the table, it is seen that sales in Turkey has a fluctuated between 2010 and 2015. Sales were 760 thousand vehicle in 2010, it increased to about 1 million vehicle. This shows that the demand for automobiles rose. From 2010 to 2015, the sales for motor vehicle grew more than %27. When we compared the sales; Passenger Car mostly sold car type against commercial vehicle. Every year passenger cars sold more than 60% instead of commercial vehicle.

VERGİLER

The automotive sector with the contribution in Indirect and direct tax revenues is one of the most important sectors. Excise duty on imported motor vehicles VAT on motor vehicle tax and excise duty over fuel are the major items from the sector SCT. The automotive sector contribute to the creation of tax revenues through VAT and excise duty indirectly, mostly employment under recording and the capital structure directly. 70 percent of Excise duty collections of the public comes from the sale of motor vehicles oil and gas taxes accrued through the consumption of products. The total paid taxes begins with the retail sale of the

car and the delivery to the user in a five-year period, reaches for approximately the price of the vehicle including sales taxes at the end of the process.With the recent regulations in the car with 1600 cc engine and over volume, this amount is increasing much more. As a result of this analysis, it is observed that the automotive sector in Turkey, is a significant tax source for the public finances. It lead to collection of taxes on the tax on the sector. In the examples of the EU taxation is often based on criteria such as carbon dioxide emissions, engine volume, weight and the number of seats. Even considering the different types of taxation, Turkey remains above the OECD average especially in the taxation of the car.

This table shows us the World’s and Turkey’s tax system on automotive industry. Government in Turkey levy tax on cars SCT and VAT. VAT is constant but SCT is changeable for car’s engine volume. At the end of the 2013 government take 40% SCT from <1600cc cars. 80% SCT from1601cc-<2000cc and 130% SCT from >2001cc cars. However government regulate tax rate in 2014 and new system include; 45% SCT from <1600cc cars. 90% SCT from1601cc-<2000cc and 145% SCT from >2001cc cars. For example value of 1600 cc car is 100.000TL and government put 45% SCT. After SCT, new price of the car will be 145.000TL.However buyer has to pay 18% VAT (145.000 * 0,18=26,100TL). After this calculation, New value of the car goes up to 171.100TL. It means that government totaly earn 71.100TL tax from buyer. When we look the other countries,Turkey’s tax payment above the most of the countries. USA apply the minimum tax rate in the world but, Denmark apply the highest tax rate on the car. Turkey’s tax rate above the OECD average.

TÜRK OTOMOTİV SEKTÖRÜNÜN ÖNEMLİ PROBLEMLERİ:

The main problems in the sector can be listed as follows:

Multinational corporations effect negatively on domestic companies; such as low-cost production, high quality products and advanced technology advantages.

Despite the increase in importance of education for qualified workforce, the University and industrial relations remain underdeveloped.

Although capacity utilization rate has increased, sufficient level is not achieved

Insufficient R & D work and the lack of sufficient resource which is transferred in this field remain below the world average

The lack of domestic capital and the price of entry is high

The automotive industry faces important issues such as being affected more than any other sector in the case of crisis and the contraction in demand