Turkey’s low penetration of passenger vehicles per 1,000 people can signal significant growth potential says the country’s Distributor Association (ODD) – provided current punitive tax rates can be addressed.
The average cars per 1,000 population figure in Western Europe is around 500 to 600 and in the East of the Continent, 300 vehicles, but in Turkey it is just 200.
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Visitors travelling around Istanbul – the business and cultural heartbeat of Turkey – might react with incredulity to that statistic given the choking traffic which routinely paralyses the giant city – but the vast metropolis does not reflect the rest of the country.
Istanbul – with its 20m population – has to be taken in isolation as it accounts for a full quarter of Turkey’s citizens – with the remaining 60m spread over a vast distance from Izmir in the West to Erzurum in the East.
“Turkey is not a saturated market…there is a long way to go,” Turkey’s Automotive Distributors Association executive coordinator, Hayri Erce told just-auto in the organisation’s headquarters in the Besiktas district of Istanbul.
“There is potential – we are behind the world and European average. Tax is relatively high in Turkey; In Europe there is no VAT but in our case it is VAT plus special consumption tax – 18% VAT plus 45% special consumption tax. We are talking to the Ministry of Finance and the government [about it]. The problem is the collection of taxes in Turkey.
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By GlobalData“Another impact is the character of the market. The car parc is aged and one third of the parc is more or less more than 20 years old. If you introduce a programme of renovation with a scrappage programme, there is potential [and] the government is introducing a new programme to prepare a [scrappage] law.”
It appears the maximum scrappage free payable will be TRY10,000 (US$2,400), although the Ministry of Finance has to issue its final directive. “I talked to them [Ministry] and they will issue the directive in mid-April,” added Erce.
Despite the punitive tax rates, the Turkish automotive market has remained more or less steady for the past three years, despite political unrest, at around 1m vehicles per year.
The ODD has just published numbers showing the passenger car market in Turkey rising 1.5% in the first quarter of this year, although LCV numbers decreased 10%. For March, the corresponding figures were +7.5% and -9%.
Although such high tax levels are clearly a disincentive to some, Turkish buyers are nonetheless keen to acquire vehicles, especially as the average car parc age is so old.
“Turkish consumers are quite enthusiastic to buy cars, but the tax is putting pressure,” noted Erce. “If the government introduces a kind of tax moderation programme, then [the] potential is there.”
Specifically, Turkish passenger car sales rose 5.4% in the first quarter to 122,310, with LCV numbers falling 9.9% to 36,120.
