Chip crisis, tax system fix: Turkey’s 2022 auto sector expectations

The automotive industry is about to put an “extraordinary” year behind it, top officials from the main automotive brands operating in Turkey said Sunday, as they pointed to developments in the course of the pandemic, the relief in supply chains that experienced a major blow over the chip shortage, and exchange rates fluctuations as being the determinative factors in 2022.

Turgay Mersin, chairperson of the Automotive Authorized Dealers Association (OYDER), told Anadolu Agency (AA) that production and supply problems, the deterioration of the demand-supply balance, exchange rate fluctuations and interest rates were factors that impacted the year-end closing figures in the sector.

The year is expected to close at levels below or very close to that of last year in terms of total sales, Mersin said, noting: “We were on a path towards 1 million unit sales at the beginning of the year, but as of the end of November, this was around 675,000. To catch up with last year and surpass it, we have 100,000 units that still need to be sold. However, it seems difficult to reach this figure due to problems on the supply side.”

Mersin also noted the urgent need to update the special consumption tax (SCT) system as some 90% to 95% of the vehicles sold now fall into the 80% SCT segment due to price increases that further hike consumer costs.

The main reason why the exchange rate-based price hikes in Turkey affect the sector is the current SCT system, according to industry representatives, who say even a small price update based on the exchange rate can increase the tax bracket of the vehicle from 50% to 80%, thus making the increase rate very high.

For example, after the recent price rise, many models that were in the 50% SCT bracket moved to the upper segment. This means that a tax difference of TL 60,000 ($5,610) is added to the unit price. The number of vehicle models in the 50% SCT segment remained below 20 with the latest change.

On the expectations for the upcoming year, Mersin said “if supply problems improve, the market will not experience a significant decrease in terms of numbers. However, if costs continue to increase due to the rapid and upward multi-directional and variable exchange rate movements there will be a contraction in demand, as these increases will be reflected in the price.”

Toyota Turkey CEO Ali Haydar Bozkurt, for his part, stated that the pandemic-induced chip crisis directly affected the automotive industry and the production of sectors on a global scale.

Bozkurt stated that production and availability issues among some spare parts groups, due to the disruption to the supply of materials used in production, and the problems faced in the logistics sector had a huge impact on the supply-demand balance, adding: “This was a problem faced not only by the factories producing in Turkey but also by all factories producing in the world and reflected on all brands.”

He said that the Turkish automotive market can expect around 1 million unit sales after the expected SCT assessment, and “if there is no vehicle availability problem.”

“Despite all these negative conditions, the market may close the year at a level below or very close to last year,” he said.

However, making predictions for 2022 is proving difficult, Bozkurt said, given that the uncertainties brought on by the pandemic may continue, namely the lack of supply for certain spare parts, the chip crisis and disruptions in logistics services.

“Thus, our industry is taking a cautious approach. If the chip crisis is overcome and the SCT scales are updated without delay, I predict that the sales in 2022 will be at the same level as in 2021. In addition, the exchange rates and interest levels are also very determining factors. Rates need to be predictable rather than high,” he said.

Turkish-French joint venture Oyak Renault General Manager Berk Çağdaş stated that for a time in 2021, it felt like a return to the first year of the pandemic in 2020 due to the chip crisis dominating the sector’s agenda and the high exchange rates in Turkey.

Çağdaş said that despite the consumer demand in September, significant decreases were experienced in October and November due to the availability problem caused by the chip crisis.

Çağdaş added that they do not anticipate the end-of-year trend the industry is accustomed to in December, noting: “We keep our market forecast at 740,000 for the year-end, slightly below last year.”

He went on to say that “many manufacturers state that the chip crisis will continue to be at the top of the sector’s agenda in 2022,” and that although the supply problem makes it difficult to predict, they “will continue to work to meet the demands of our consumers by maintaining our cautious and optimistic stance, depending on the course of exchange rate volatility.”

“An update to the SCT tax brackets in the new year will prevent the reflection of the cost burden brought by the rising exchange rates to the consumer,” he also said.

Murat Berkel, general manager of Hyundai Assan, a joint venture of Turkish Kibar Holding and Hyundai, said that the chip crisis is predicted to have continuing effects in 2022, at least in the first half of the year.

“Potential disruptions in supply, fluctuations in exchange rates and the inability to ensure the stability of the economy may cause changes in the balance of the market from time to time. These variations during the year may cause the market not to reach the expected levels. However, we can predict that the market will not remain below this year when the conditions are favorable,” Berkel said.

Honda Turkey Deputy General Manager Bülent Kılıçer said that 2021 will be remembered as an “extraordinary” year for the industry, describing it as a successful year for the company.

Kılıçer said demand, which started to increase with the growing need for mobility during the course of the pandemic, gained momentum once cars started to be viewed as an investment tool once again; however, he echoed that 2021 will be remembered as a year in which supply gradually fell due to the sector-wide chip crisis and rise in raw material prices.

While production declined globally, he said, pricing difficulties were especially prominent in Turkey due to volatile exchange rates and SCT base limits.

Achieving last year’s total sales figures appears unlikely when the developments in the last month are taken into account, Kılıçer said.

Noting that the increases in hybrid and electric car sales are important in such a volatile year, Kılıçer commented on his expectations for 2021, underlining that in order to increase consumers’ access to automobiles, “conditions such as price stability, access to vehicle loans, interest rates and the SCT base regulation need to be improved.”

“The course of the deterioration in the supply chain is also a very important factor. It should not be forgotten that at least the first half of 2022 will be experienced in a highly inflationary environment. Based on all these facts, the best scenario for the next year will be that the sector catches up with the production, export and sales figures realized this year,” he said.


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