Turkey to impose tariffs on all Chinese cars

20/06/2024

The Chinese brand Chery is very popular in Turkey. Will tariffs put a dent in its sale numbers?

New import duties will drive up the cost of Chinese cars sold in Turkey. Authorities want to protect domestic brands and convince Chinese manufacturers to build factories in the country.Turkey plans to impose tariffs on all cars imported from China. The Turkish Ministry of Trade announced that duties of 40% or at least $7,000 (E6,500) will be levied on every vehicle. The country already introduced a tariff on Chinese electric vehicles (EVs) last year. Starting July 8 on, tariffs on imported Chinese cars could total up to 50%.

Many automotive industry representatives are very concerned by this move. Turkey's domestic market is already volatile, and inflation has been very high in recent years. They fear that extra tariffs will drive up prices even further.

Turkish workers with an average income can hardly afford buying a car anyway. The Turkish minimum wage is currently equivalent to E485 ($520) with annual inflation standing at 75.45%. Almost half of all Turkish workers earn minimum wage, according to DISK, a major trade union.

Will European carmakers follow suit?

Introducing tariffs on all Chinese vehicles interferes with the free market, says Aydın Erkoc, the head of Turkey's Motor Vehicle Dealers Federation (MASFED). "If a tax is increased, it should apply to all brands," Erkoc told DW. He, like many others, fears that European manufacturers will now follow suit and increase the price of their cars. While they had held back so far because of the cheap competition, all vehicles will now become more expensive, he says.

There is another reason why new cars are becoming more expensive in Turkey, says Ali Karakas, CEO of otomerkezi.net, a used car sales platform. New EU rules to increase road safety come into effect in July. All new vehicles will have to come equipped with driver assistance systems such as brake assist, fatigue warning, and alcohol interlocks, among other things. This combined with extra tariffs on Chinese cars could increase car prices by around 45%, says Karakas. Yet he also thinks these changes could revive the used car market.

"Cheap Chinese vehicles have so far had the biggest negative impact on the used car market," Karakas told DW. "Many consumers prefer new Chinese cars to used European vehicles," he added. But he believes that if new cars become more expensive, this could benefit the used car market.

Erkoc is less optimistic and explains that used car sales have dropped by up to 70% in the past year or so. He expects the slump will drag on for at least another six months. "The automobile market will continue to stagnate as long as inflation and bank interest rates don't drop," he said.

Chery announced Turkish production site

Chinese cars have grown increasingly popular in Turkey, with ten brands now vying for market share. Currently, Chinese car sales make up about 10% of total automobile sales in Turkey. Unsurprisingly, China's Ministry of Commerce vehemently objected to the new tariffs on Chinese vehicles, calling them discriminatory and demanding they be scrapped.

Turkey hopes the tariffs will protect domestic car makers like TOGG. The country also wants to encourage Chinese manufacturers to invest in the country -- a plan that seems to be working out.

Chery is currently the most sought-after Chinese car brand in Turkey. "We are striving to begin producing cars in Turkey as quickly as possible," Si Fenghuo, the head of Chery Turkey, told DW. Kagan Dagtekin, CEO of Dogan Trend Otomotiv, the Turkish distribution partner of MG, shared similar plans with DW, describing how they are trying to set up the first European production site in Turkey.

But Husamettin Yalcin, the managing director of Cardata, a company that provides data services on the Turkish automotive sector, first wants to see facts on the ground. "We have heard that some Chinese manufacturers want to invest in Turkey since the decision was made to introduce an extra tariff," told DW. "But it remains to be seen whether these announcements will materialize."

According to data by the Automotive Distributors and Mobility Association (ODMD), total car sales in Turkey rose by to 471,473 units between January and May, a 6% increase in comparison to the same period last year. EV purchases rose by around 257%, while the number of hybrids sold increased by about 50%. Demand for diesel-powered cars, in turn, has fallen: Only one in ten vehicles is now diesel. Petrol-powered cars have roughly maintained a 66% market share.

This article was translated from German.

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