Skip Ribbon Commands
Skip to main content


​Global crisis challenges the automotive sector

2008 was a very difficult year for the automotive sector around the world, including Turkey. In global markets, automobile sales were negatively affected by high oil prices during the first half of the year. Sales started to decline even more sharply after the third quarter as the deepening economic crisis began to assert itself on the markets. While sales in the U.S., the world's largest market, faced historic declines, the U.S. auto giants like General Motors and Daimler Chrysler applied to the Administration and Congress for financial support. Companies in other countries began suspending production, laying off workers, postponing model launch dates, and deferring investment due to the construction in demand. In Germany, the biggest market in Europe, the 2008 production level decreased by 3% against 2007 for the first time since 2002 while sales decreased by 1.9%. Meanwhile, the Japanese market shrunk by 6.5% to experience its worst year since 1974. 

Total sales in the Turkish automobile market, which were up in the first five months of 2008 compared with the same period in 2007, began to decline from June onwards. Total sales of passenger cars and light commercial vehicles declined by 17% to 494,023 units, according to the Automobile Distributors Association. Passenger car sales fell by 14.4% while the sale of light commercial vehicles slid by 20.8%. The 53.3% decline in sales during the last quarter of the year made it the worst fourth quarter for domestic automotive sales since 2002. 

Total automotive production, on the other hand, increased by 4.3% during the year. Exports grew by 14.6% to $21.9 million, according to data from the Automotive Manufacturers Association, despite the contraction in the export markets, mainly due to the strong performance in the first half of the year. 

During the first half of 2008, the entry of low-priced Far Eastern brands into the market intensified competition. In Turkey, where car purchases are financed mostly by bank loans, expectations that interest rates would decline towards the end of the year led potential buyers to defer car purchases. This resulted in a decline in sales which was later compounded by the deepening global crisis and subsequent expectations of a decrease in the Special Consumption Tax towards the end of the year. 

Volatile energy prices and escalating foreign exchange rates increased costs while the decrease in domestic demand caused manufacturing plants, many of which had recently invested in capacity increases, to stand idle. 

Due to the internal dynamics of the heavy commercial vehicle market, the impact of the crisis on this segment was relatively mild. The trend towards higher usage of buses in public transportation and fleet purchases was another factor ameliorating the negative effects of the crisis. 

The farm tractor market was adversely affected by the crisis even though the VAT burden on tractors and agricultural equipment was cut from 18% to 8% and the Government continued to support farmers by subsidizing 50% of agricultural equipment purchases. Adverse impact of the crisis intensified since banks cancelled their loan programs, became more selective and increased their interest rates, thereby dampening demand. 

The defense industry was strong with higher domestic demand for locally manufactured products as well as stronger demand from export markets.

Koç Group Automotive Segment

In 2008, Koç Group companies accounted for 47% of Turkish automotive production and exports. 

Despite a significant contraction of the domestic market, total production of Koç Group's automotive companies exceeded 561,000 units - an increase of 7.9%. The automotive exports of the Group reached 437,595 units, an increase of 16.7%. Koç Group companies continued their leadership in the commercial vehicles segment with a production level of 462,532 units and realized 96.2% of Turkey's commercial vehicle exports in 2008.

​There is continued concern that the global economic crises will worsen. In addition, contraction of the North American, European and Asian markets makes it unlikely that the automotive sector will recover anytime soon. However, it is inevitable that new equilibriums will emerge in the market and it is quite possible that during this process, manufacturers will turn to alternative means to increase their competitive advantages and move operations to more efficient production hubs.

In this context, Koç Group automotive companies, which have long-standing strong partnerships with world automotive giants such as Ford Motor Co. and Fiat S.p.A., made significant investments, initiated large scale export projects and begun to serve as a production hub for several brands, aiming to maximize the advantages they can derive from the restructuring process that will take place in the global automotive market. In particular, such advantages as increased R&D focus, the employment of advanced technologies and the implementation of cost reduction projects, as well as an experienced and efficient labor force, will be the main factors that differentiate Koç Group companies and create added value in this process.​

​​*​These trademarks are used in accordance with the current license agreements.