Will Turkey, which spans Eurasia, be a new channel for Chinese car companies to enter the European market under the cloud of EU tariffs?

Public information shows that in March 2023, Turkey announced that it would impose an additional 40% additional tariff on electric vehicles imported from China, increasing the total tariff to 50%. On June 8, 2024, Turkey announced that it would expand this policy from electric vehicles to all imported vehicles from China (including auto parts). If the tariff is less than US$7000, it will be charged at US$7000, starting from July 8 this year.

But less than a month later, the Turkish government's "Official Gazette" announced in early July the presidential order on amending the Decision on Imposing Additional Tariffs on Imported Products, stipulating that no additional taxes will be levied on automobile imports within the scope of investment incentive policies., and will take effect immediately. According to the latest regulations, automobile manufacturers investing and setting up factories in Turkey will enjoy investment incentives and will not have to pay the previously stipulated additional tariff of 40%, but only need to pay a tariff of 10%.

It has twice announced additional tariffs and now has conditional "tariff exemptions". What is Turkey's consideration?

Zou Zhiqiang, a researcher at the Center for Middle East Studies at Fudan University, told the First Financial Reporter that Turkey hopes to use tariffs to leverage Chinese companies to invest in Turkey, promote the development of its own new energy vehicle manufacturing industry, and promote Turkey as a base to export to the European Union and other surrounding areas.

Huseyin Emre Engin, Turkish Consul General in Shanghai, said in an interview with First Financial and other media that in fact, the Turkish people have a high evaluation of Chinese brands in recent years, and the reputation of Chinese-made products is in Turkey. The market is very good. For Chinese companies, the higher the degree of localization, the better the future prospects will be.

Completely eliminate additional tariffs?

Just a few days after the Turkish government announced the presidential order "Amending the Decision on Imposing Additional Tariffs on Imported Products", on July 8, local time, witnessed by Turkish President Erdogan, BYD and the Turkish government signed an investment in Turkey. Factory agreement.

Mehmet Fatih Kacır, Turkish Minister of Industry and Technology, said BYD will invest US$1 billion (approximately 7.273 billion yuan) to build a production plant and R & D center with an annual output of 150,000 vehicles in Turkey. The factory is scheduled to go into production by the end of 2026 and will employ 5000 employees. It is worth noting that during Cahill's visit to China late last year, he visited BYD's Shenzhen headquarters.

Regarding the Turkish government's new policy that "no additional taxes and fees will be levied on automobile imports within the scope of investment incentive policies", Enkin emphasized to the First Financial Reporter that it is inaccurate to spread online that 100% tariff exemption or no tax will be completely exempted., the estimates for exemption are customs duties, etc.

Regarding BYD's investment, Enjin said that the scale of this investment is second only to the company's layout in Hungary."I believe this is the first step in BYD's localization in Turkey, and it is also true for other Chinese brands. Turkey has a sound foundation, and for companies, this is a good opportunity to move forward."

In addition, Zafer Sirakaya, vice chairman of the Turkish ruling Justice and Development Party, said in early July that Guangzhou Automobile Group was negotiating with Turkish Automobile Joint Holding Group (TOGG) on the possibility of establishing a joint venture. TOGG is Turkey's first electric vehicle manufacturer, and the price of its first ordinary model is around 350,000 yuan.

Just one day before BYD announced its investment and factory in Turkey, Sway Motors, a subsidiary of Brilliance, also expressed strong interest in the Turkish market. Sway Motors represents Atmo Group CEO Chernov said that it has proposed a plan to the Turkish government to build a new factory with an annual production capacity of 50,000 vehicles in Turkey.

Enkin said that in his territory, many Chinese companies have been discussing future investment with Turkey, and these discussions have been going on for many years."We will definitely see more cooperation in this regard in the future."

Zou Zhiqiang told the First Financial Reporter that Turkey's local electric vehicles are less competitive, which is reflected in their higher prices and low penetration rates. Therefore, from Turkey's perspective, it is hoped that foreign investment will be made to rapidly expand the layout and production of domestic electric vehicles.

"Turkey is very happy to cooperate with Chinese companies." Enkin said,"We have no Western concerns or so-called technical limitations. We have been maintaining close cooperation with Chinese companies in the fields of electric vehicles and batteries." He also believes that China is an important player in the global electric vehicle field, and mutual cooperation must be a win-win result.

welcomes Chinese enterprises to invest

In the Turkish economy, the automobile industry occupies an important position. Enkin said that Turkey has a population of 85 million. Although the population cannot be compared with China, Turkey still has a huge consumer market,"the same is true for electric vehicles and electric vehicle-related industries. For the past 10 years, Turkey has been working hard to produce its own local electric vehicle brand and trying to build a global brand."

According to public information, there are many automobile brands in Turkey that have been focusing on automobile production and manufacturing since the 1940s. TEMS, Otokar, BMC, etc. are strong in the field of heavy vehicles such as buses, trucks, and special vehicles. According to data from the Turkish Automobile Distribution and Mobile Association, Turkey's total market for automobiles and light commercial vehicles in 2023 will reach 1.233 million units, an increase of 57.4% compared with the previous year. Among them, sales of pure electric vehicles were 66,000, accounting for 6.8% of Turkey's total sales, compared with only 1.2% in 2022. Turkey's energy market regulator predicts that by 2025, the number of electric vehicles in Turkey will increase by approximately 180,000. Research firm BMI predicts that by 2032, the share of electric vehicles in domestic vehicle sales in Turkey will reach 30.4%.

However, it is still international automobile brands that dominate the Turkish market. Foreign brands such as Volkswagen, Fiat, Renault, and Ford all have factories in Turkey. According to public information, about 70% of Turkey's automobile production in 2023 will be targeted at the international market. During the same period, Turkey exported more than 950,000 vehicles to the international market. By 2023, Turkey will be the second largest European car exporter after the UK. In 2023, Fiat, Renault, Volkswagen, Ford, Volkswagen, Peugeot, Opel, Citroen, Toyota, Hyundai, and Dacia will be the top ten car companies in sales, accounting for 72.6% of the market share. In the Turkish automobile market, Chinese brands include Chery, MG, BYD, Hongqi and Dongfeng. Chery ranked 11th with 41,000 vehicles, MG ranked 20th with 14,000 vehicles, and BYD ranked 37th with 839 vehicles.

Enkin said that Turkey's location connectivity allows companies to not only sell in the Turkish market, but also radiate exports to surrounding areas such as the Middle East and Russia."For companies, the cost of production and export in Turkey is very low." Because Turkey enjoys a customs union agreement with the European Union, cars produced in Turkey can be exported to the European Union without paying additional tariffs. Stimulated by this policy, the Marmara region around Istanbul has become one of the major centers of the world's automobile industry.

"Selling in the local market is a good thing for car companies, but conducting localized research and development in the local market is obviously more conducive to the internationalization of the brand." Enkin said,"Turkey welcomes Chinese companies, especially young start-ups, to invest and establish R & D centers locally."