Market Report, "Turkey Autos Report Q4 2013", published

From: Fast Market Research, Inc.
Published: Wed Oct 23 2013

Autos production in Turkey is starting to increase more rapidly, driven by ongoing growth in export volumes. Indeed, it has long been BMI's core view that, after a moribund H113, autos output in the country would trend higher in H213.

This continues to play out, with a 23.9% y-o-y increase in output during August. Over 8M13, vehicle production increased 4.7% y-o-y, to 1,105,568 units, according to figures from the Turkish Automotive Manufacturers Association (OSD). We expect to see ongoing production increases in the latter part of the year, although the strong August rate is unlikely to be sustained, on the back of strong export growth and solid fundamentals. Accordingly, we maintain our 2013 production forecast for a 3.1% increase across the auto sector (passenger cars plus commercial vehicles).

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In addition to rising production, auto sales have also been powering ahead in Turkey over 2013 to date. Over 8M13, total new vehicle sales rose by 13.5% y-o-y, to reach 543,070 units, according to figures from the OSD. Much of this sales increase has been met by a 24.2% y-o-y increase in vehicle imports in this period, to 376,107 units, and the domestic market is not a key driver of growth for vehicle production in the country. Following sustained currency weakness, we expect vehicle imports to slow down over the course of the year, as they become more expensive in local currency terms.

Breaking down the headline figure, passenger car sales were up by 21% y-o-y over 8M13, at 399,429 units, with commercial vehicle sales down by 7.5% y-o-y, at 143,641 units. This ties in with BMI's own analysis of the market, which calls for much stronger growth in passenger car sales than for commercial vehicles. We continue to forecast overall vehicle sales to increase 9.9% and passenger car sales to increase 14% in 2013, a slight slowdown from the relatively strong growth witnessed at the beginning of the year. It should be noted that much of this demand is met by vehicle imports and is not a key driver of growth for domestic vehicle manufacturing, and does not crowd-out exports to a significant extent.

We believe that current economic conditions may serve to adversely impact growth in the domestic market later in 2013. Broader private consumption has remained fairly robust over the year to date, but we caution that there are a number of downside risks to this being sustained, including further tightening of credit conditions and high inflation.

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