A consumption tax cut is likely to reduce stocks of unsold vehicles in Turkey much quicker than first thought.

Turkey’s prime Minister, Tayyip Erdogan, announced the three-month tax cut last Friday as part of measures to boost economic activity as the country heads for recession this year.

Special consumption tax on vehicles with engines under 1.6-litre, fell from 37% to 18%.

Automotive Distributors Association (ODD ) chairman Ibrahim Aybar told Reuters the reduced tax on vehicle sales is expected to deplete the stock of unsold vehicles within three months rather than an originally planned six to seven months.

Following the tax cut, an initiative should be launched to encourage the scrapping and replacement of vehicles more than 16 years old to boost the ailing market, he added.

“It is important that our stocks are reduced, but the most important thing is that additional sales are created. What is important is to ensure continuity three months later,” Aybar said.

ODD data showed passenger and light commercial vehicle domestic sales in Turkey fell 17% year on year in 2008 to 494,023 vehicles and a 25% drop had been expected this year before the latest tax cuts was announced.

The temporary tax cut, in effect from yesterday (16 March), prompted a rally in Turkish automotive sector shares, the report noted.