Turkish Car Sales Plummet as Industry Demands Government Support

(Bloomberg) -- Turkish auto sales plummeted a month after tax incentives expired, in a stark display of how dependent the market has become on government life support.

Sales of cars and light commercial vehicles, or LCVs, fell 66% in July from a year earlier to about 18,000 units, according to data published by the Automotive Distributors' Association, known as ODD. The drop was the biggest since October, taking losses in the first seven months to 48%.

“The industry has been contracting for the past two years,” ODD Chairman Ali Bilaloglu said by phone on Friday. To kickstart sales, a special tax on cars with engines smaller than 1,600 cubic centimeters should be repealed for this year, he said.

With the economy reeling from a currency crisis last summer, Treasury & Finance Minister Berat Albayrak rolled out significant tax breaks at the end of October to support waning domestic demand.

The so-called Special Consumption Tax, applied to cars with engine sizes that account for nearly 60% of the market, was reduced by 15 percentage points and the valued-added tax on commercial vehicles was slashed to 1% from 18%. The incentives expired in June.

If similar measures aren't taken again, domestic sales could fall to about 350,000 units this year, Bilaloglu said. That's a long shot from 2016's record of 983,720 units.

“Dealerships have reached a point of decision on whether to continue their business or not,” he said.

In July, Fiat vehicle sales fell 64%, while those of Ford Motor Co. and Volkswagen AG vehicles declined 80% and 77%, respectively, the data show. Overall, the decline in passenger cars reached 63% last month, while LCV sales fell 76%.

Shares of Ford Otomotiv were down 2.7% at 1:15 p.m. in Istanbul. Tofas, a joint venture of Fiat Chrysler Automobiles NV and Turkey's Koc Holding AS, dropped 3.4%. Dogus Otomotiv, the distributor of Volkswagen vehicles, fell 0.6%.

--With assistance from Ugur Yilmaz and Baris Balci.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Paul Abelsky, Mark Williams

©2019 Bloomberg L.P.