Head out on the highway: International automotive companies gain a presence via joint ventures

The sixth-largest vehicle manufacturer in the EU and the 17th-largest in the world, Turkey is now a major player on the global automotives map. Indeed, within the EU, it is first in light commercial vehicle (LCV) production and second in buses, turning out a total of 1.073m units of all kinds in 2012.

Now, the sector faces major challenges, including keeping its output up in the face of decline in its main market – the EU – while also trying to achieve the ambitious targets put forward by the government in its plans for 2023. Nonetheless, keeping up with global demand while moving the sector higher up the value chain is helping sector players to reach better performance levels. And with automotive investment to be termed “priority investment” by the authorities, tax breaks of up to 60% and deductions on labour costs are being added to boost investment.


While automotive production began in Turkey back in the 1960s, it was not until the 1990s that it began to take off, with the end of the industry’s previously protected status and the arrival of major, modern manufacturers, such as multinational brands like Toyota and Honda, as well as Hyundai.

Turkey also signed a Customs union with the EU in 1996, which opened up the neighbouring market for Turkish-manufactured vehicles. France’s Renault, the US’s Ford and Italy’s Fiat had already joined the industry by that time, and by 2012 some 44 passenger car (PC) manufacturers, 23 LCV manufacturers, and 12 truck and bus manufacturers are represented in Turkey. Among them are renowned global brands, from Mercedes to Mitsubishi. The majority of these brands have their plants in the north-western part of the country, in the Istanbul-Izmit-Adapazarı region. This affords the best transport connections to the industry’s main market, Europe, while also giving access to the wealthiest and most urbanised part of the domestic population, and the highest road density. Beyond this, Ankara, Adana and Izmir also have concentrations of manufacturers.

Foreign Presence

Many of the international companies present in the country are here under joint venture (JV) agreements with local outfits. Tofaş, which has led the market for many years in terms of capacity, with 450,000 units per year, according to the Turkish Automotive Manufacturers Association (OSD) figures, is a JV between Turkey’s Koç Holding and Fiat, both of which have a 37.8% stake. Second in terms of capacity, with 360,000 units per year, is Oyak-Renault, a JV between Renault, which owns 51%, and Oyak, also know as the Turkish Armed Forces Pension Fund, which owns 49%. Similarly, Hyundai-Assan, with a capacity of 100,000 units per year, is a JV between Hyundai and Turkey’s Kibar Holding, while Ford also has a JV with Koç Holding, Ford-Otosan, which has an annual capacity of 350,000 units. Other important JVs in the country include Mercedes-Benz Türk and Anadolu Isuzu.

Tag-Along Sectors

In addition to these manufacturers, a vast array of associated industries has developed, including tyres, upholstery, windscreens, plastics and paints (see analysis). Tyre production alone saw an 8-9% increase in 2012, according to Marco Giuliani, the general manager of Michelin Turkey, with an annual turnover of 15m units – 10m replacements and 5m originals.

“Turkey is the sixth-largest market for passenger car and light truck tyres in Europe,” Giuliani told OBG. “However, in this segment, Turkey is the fastest-growing market in Europe in terms of value and volume.”

Meanwhile, of the 1.07m vehicle units produced in 2012, around 730,000 were exported, according to the OSD, with both of these figures down on 2011, by 9.83% and 7.59% respectively. Looking at those exports, OSD data for 2012 shows Oyak-Renault was the top exporter, sending 227,162 units overseas that year, up from 225,285 in 2011, but down from 233,057 in 2010. Second was Ford-Otosan, with 191,149 in 2012, 211,380 in 2011 and 175,754 in 2010. At number three was Tofaş, with 154,068 units in 2012, 180,690 in 2011 and 193,737 in 2010. The figures for total sector exports were 745,354 in 2012, 801,112 in 2011 and 763,670 in 2010. In monetary terms, total sector exports were worth $19.06bn in 2012, down 5.3% on 2011, and represented 12.6% of the country’s total exports, according to data from the Turkish Exporters’ Assembly. However, OSD data suggests a slightly higher figure of $19.33bn, also down, by 5%. Despite this decline, automotives were still the largest exporter by sector in the country.

Breaking this down by type of vehicle, in 2012 PCs accounted for some 412,991 units exported, down 7% on 2011, while commercial vehicles (CVs) of all kinds exported 316,932 units, which was down 9% on the previous year. Among the CVs, pick-up trucks had the highest number, with 292,601 of the total, followed by minibuses, with 16,429. One segment that saw spectacular growth was tractors, with 15,431 units exported in 2012, up 52% on 2011. Some have been able to generalise these trends. “Over the past several years the automobile market in Turkey has been reshaped by two key trends,” said Ali Bilaloğlu, the CEO of Doğuş Otomotiv. “First, a shift in consumer preferences towards mid-range vehicles that come equipped with high-end amenities; second, rising sales outside of major urban areas.”

Another feature of recent years has been an increase in the proportion of completely knocked down (CKD) units, by value, when comparing the number of completely built units (CBU) exported. According to OSD statistics, the value of CKDs went from $6.11bn in 2007 to $8.22bn in 2012, while the value of CBUs has declined – from $13.07bn in 2007 to around $11.1bn in 2012.

Domestic Effects

Meanwhile, imports of vehicles have been rising steadily over the last decade, although after the global downturn in 2007/08, they declined in 2011/12. In 2010 total imports of PCs and CVs were 465,408 units, rising to 538,532 units in 2011. This then fell to 511,694 in 2012. The total domestic car market thus went from 793,172 to a record 910,867 in 2011, then 817,620 in 2012.

Looked at over time, the vehicle market figures follow the pattern of ebb and flow in international trade, with numbers that rose in the early part of the century showing a sharp drop with the global downturn in 2008/09. The market recovered slightly from this, but then declined again in 2012.

“Exports are our main market,” Ercan Tezer, the secretary general of the OSD, told OBG, “and 2012 was not a good year for these. The European market declined 7.8%, so more than 2m vehicles a year have been lost in the European market in recent years. This reflects strongly on us.” Pushing growth under these circumstances may be tough, particularly when the target for 2023 (see overview) is $75bn in exports from 4m units sent overseas – implying a three-fold increase in the next 10 years. Still, there are a number of reasons to be optimistic.

Think Globally, Act Locally

According to the OSD, Turkey has a personal vehicle density figure of around 135 per 1000 people, which is still lower than the global average of 155, and a fraction of the US total of 562, or UK total of 601. Thus, the Turkish domestic vehicle market has considerable room for expansion, although it is not without a number of challenges. Number one among these, insiders told OBG, is the tax level. In September 2012 the special consumption tax (SCV) payable on automotives was hiked, up from 37% to 40% for vehicles under a 1600-cc engine, along with an SCV hike of TL0.30 (€0.13) per litre on petrol. This comes on top of vehicle tax, meaning that for a two-litre car, tax can sometimes reach approximately 170% of the pre-tax value.


As an established segment of the domestic economy, the automotive industry in Turkey is able to draw upon a large pool of readily available qualified workers and managers, with wage levels generally lower than those in the EU. At the same time, industrial relations are better than in many other countries in the region. “Human resources in Turkey’s automotive sector are exceptional,” Haydar Yenigün, the general manager of Ford Otosan, told OBG. “One only has to visit the shop floor to see the enthusiasm, productivity and craftsmanship of our workers and engineers. We believe that engagement is the key to success,” he added.

Research and development (R&D) facilities are also widespread and well provided for. A scheme of incentives to encourage local R&D has been put in place as well and the government has launched an initiative to create a Turkish-brand car as part of its national development plan Vision 2023.

An important feature of any new brand is the ability to establish a sales network, customer recognition and trust, and a resale market. Fully realising local potential may prove vital. “No industry can rely on exports alone,” Tezer told OBG. “We need a strong and sustainable domestic market in order to compete in global markets. You see this in Japan and Korea, where there is a good local market and few imported cars.”


You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Turkey 2013

Industry & Retail chapter from The Report: Turkey 2013

Cover of The Report: Turkey 2013

The Report

This article is from the Industry & Retail chapter of The Report: Turkey 2013. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart