Recession-hit Turkey’s ailing auto market may see a very deep contraction in July, according to the deputy general manager of Honda Turkey.
“Sales could drop as much as 80% in the month. Potential buyers still expect a move from the government to extend the special consumption tax reduction on cars and because of this expectation they are delaying their purchases,” Bulent Kilicer said.
The tax reduction on cars expired as of end-June. The situation demonstrates how reliant on fiscal stimulation Turkey’s economy has become in the wake of the currency crisis that triggered the country’s ongoing economic woes, including dramatic slumps in consumer demand.
Consumer index drops
The latest Turkish consumer confidence data, released on July 23, show the confidence index fell to 56.5 points in July from 57.6 points in June. The index stood at 55.3 points in May, its lowest level on record since the data was first published in 2004. A confidence level below 100 indicates a pessimistic outlook.
Kilicer underlined how the market kept shrinking despite the tax cut. He predicted that only 10,000-15,000 cars would be sold in July. “That is a 75%-80% decline compared to a year ago,” he said.
Sales have almost come to a halt as tax reductions expired, confirmed Haydar Yenigun, head of the Automotive Manufacturers’ Association (OSD). The body reported earlier this month that the country’s auto output declined 13% y/y in the first half of the year.
Yenigun, however, did not provide any figures.
The Automotive Distributors’ Association (ODD) reported this month that sales declined 16% y/y to 43,000 units in June. That followed the 56% y/y and 55% y/y contractions in April and May.
Auto sales in Turkey have declined in every single month since April 2018.
In 2018, Turkey’s automotive industry contracted 35% as a total of 620,937 units of passenger cars and light commercial vehicles (LCVs) were sold versus 956,194 units in 2017.
The ODD predicts that vehicle sales will amount to between 350,000 and 400,000 units this year.