The foundations of Turkey’s automotive industry date back to the early 1960s, when the first efforts to develop and produce the first Turkish-made passenger car were undertaken. During a period of rapid industrialization and progress, this key sector transformed itself from assembly-based partnerships to a full-fledged industry with design capability and massive production capacity. Between 2000 and 2014, original equipment manufacturers (OEM) invested more than USD 12 billion in their operations in Turkey. These investments significantly developed their manufacturing capabilities, which has led to Turkey becoming an important part of the global value chain of international OEMs. Meeting and exceeding international quality and safety standards, today’s Turkish automotive industry is highly efficient and competitive thanks to value-added production. Turkey accounts for 25 percent of the automotive production occurring in Central and Eastern Europe.
The automotive industry is a main driver of the manufacturing sector in Turkey. It is one of the largest employers in the country, creating job opportunities for more than 400,000 people. With three out of the five top exporters hailing from the automotive industry, it is also an export champion with its 16 percent share in total exports.
In 2011, the Turkish government released an official automotive sector strategy in a bid to shape the future of the industry. This strategy has as its primary objective the “enhancement of sustainable global competitive strength of the automotive sector and its transformation into an industry that utilizes advanced technology and generates high value-added.” The key elements of this official strategy include the production of a locally designed and manufactured car, research into which is already underway. Turkey is set to become one of the few countries with its own automobile brand in the coming years.
To this end, activities aimed at improving the R&D, design and branding capabilities will play a vital role in reaching the higher end of the value chain. As such, Turkey’s automotive industry is increasingly investing in R&D efforts. As of the end of 2014, 50 R&D centers belonging to automotive manufacturers/suppliers are operational in Turkey. This accounts for the largest group of R&D facilities in any industry in the country.
The total amount spent on R&D activities in Turkey has also been increasing steadily, with R&D expenditures reaching TRY 14.8 billion in 2013, up from 2001’s level of TRY 1.29 billion — an impressive compound annual growth rate (CAGR) of 22.5 percent. The R&D spending in Turkey’s automotive industry rose from TRY 206 million in 2006 to TRY 547 million in 2013. Notable examples of global brands conducting product development, design and engineering in Turkey include Ford, Fiat and Daimler. Ford Otosan’s R&D center is one of Ford’s three largest global R&D centers, while Fiat’s R&D center in Bursa is the Italian company’s only center serving the European market outside its home country. Meanwhile, Daimler’s R&D center in Istanbul complements the German company’s truck and bus manufacturing operations in Turkey.
Turkey also offers a supportive environment on the supply chain side. There are around 1,100 first-tier companies working directly with OEMs. With the parts going directly to the production lines of vehicle manufacturers, the localization rate of OEMs varies between 50 and 70 percent. Turkey is also home to many global suppliers. There are more than 250 global suppliers that use Turkey as a production base, with 28 of them ranking among the 50 largest global suppliers.
The product portfolio of automotive manufacturers in Turkey covers a wide range of vehicles from sedans to heavy trucks. Taking advantage of its competitive and highly-skilled workforce, dynamic local market and favorable geographical location, Turkey increased its vehicle production from 374,000 in 2002 to over 1,170,445 units in 2014, representing a CAGR of around 10 percent during this period.
This growth has led Turkey to become the 17th largest automotive manufacturer in the world. Turkey has already become a center of excellence, particularly with respect to the production of commercial vehicles. By the end of 2014, Turkey was the largest producer of light commercial vehicles in Europe.
Auto manufacturers increasingly choose Turkey as a production base for their export sales. This is evidenced by the fact that around 75 percent of production in Turkey is destined for foreign markets. In 2014, close to 900,000 vehicles were exported from Turkey to different markets. While Germany, France, Italy, UK and Spain are currently the major export customers of the Turkish automotive industry, there is a trend of diversification in export destinations with companies looking into nearby emerging countries where there is considerably more demand potential for new auto sales.
Turkey’s strength in the auto industry has been built on its robust domestic demand, which has driven investment in the industry by major international auto manufacturers. Backed by the country’s strong economic performance, auto sales have shown remarkable growth in recent years. Between 2003 and 2014, the Turkish automotive market saw a CAGR of 9.30 percent.
In 2013, domestic vehicle sales reached just shy of 800,000 units. Despite strong sales figures, automobile penetration in Turkey — 165 cars per 1,000 people — is still well behind the European average of 500. This indicates ample opportunities for carmakers in the domestic market. Increased purchasing power combined with a low automobile ownership rate should help drive automobile sales in the coming years.