The foundations of Turkey’s automotive industry date back to the early 1960s, when the first efforts to develop and produce a 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 in turn 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.
Using a competitive and highly-skilled workforce combined with a dynamic local market and favorable geographical location as leverage, the vehicle production of 13 global OEMs in Turkey increased from 374,000 in 2002 to over 1.3 million units in 2015. This represents a compound annual growth rate (CAGR) of around 10 percent during the same period.
Significant growth posted by Turkey’s automotive sector led to Turkey becoming 15th largest automotive manufacturer in the world and 5th largest in Europe by the end of 2015.
Turkey has already become a center of excellence, particularly with respect to the production of commercial vehicles. By the end of 2015, Turkey was the number one producer of light commercial vehicles (LCV) in Europe.
Proven as a production hub of excellence, the Turkish automotive industry is now aiming at improving its R&D, design, and branding capabilities. As of the end of 2015, 75 R&D centers belonging to automotive manufacturers/suppliers are operational in Turkey.
Notable examples of global brands with product development, design, and engineering activities in Turkey include Ford, Fiat, Daimler, AVL, and Segula. 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 offers a supportive environment on the supply chain side. There are around 1,100 component suppliers supporting the production of 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 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.
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 2015, more than 900,000 vehicles were exported from Turkey to foreign markets.
While Germany, France, Italy, the 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 to break into nearby emerging countries where there is considerably more demand potential for new auto sales.
The rise of per capita income from USD 3,000 in the first few years of the 2000s to USD 10,000 in 2015 led to higher sales in the motor vehicles market. While the average annual sale figures in the market were around 360,000 in the early 2000s, the average sales increased to 870,000 by 2015.
Despite the strong growth in the market, the automobile penetration in Turkey -- 165 cars per 1,000 people -- is 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.