The vehicle market in Turkey is being hit by the recent fall in the lira and a sharp rise in interest rates, according to Reuters.
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Around 70% of cars sold in Turkey are imported, but the lira has lost more than 15% of its value since the end of April pushing prices up. In addition the lira’s slide has caused inflation and thus interest rates to rise, making car loans out of the question for many people.
Although the domestic industry will benefit from lower export prices, a contraction in domestic demand will hit it hard. One analysts quoted by Reuters expects Turkish vehicle production to fall three percent this year overall, and ten percent in the second half of the year.
The profitability of joint ventures such as Ford Otosan and Tofas (Fiat’s joint venture in the country) will also be reduced because they will have to pay more for imported components.
The Turkish government had been forecasting six percent economic growth in 2006, but economists polled by Reuters this month are forecasting 4.5% on average.
