Turkey's Automotive Investment Drive: New Tariff Exemptions

Turkeys Official Gazette published on the 5th the presidential decree On Amending the Decision Regarding Additional Duties on Imported Products,stipulating that automotive imports within investment incentive policies will not be subject to extra taxes,effective immediately.According to Turkey News Network,under the new regulation,automakers investing in Turkish production facilities will enjoy investment incentives without paying the previously mandated 40% additional duty,instead paying only 10% tariff.This policy adjustment aims to attract more foreign investment,particularly from Chinese automotive manufacturers to establish production in Turkey.

Latest policy background and objectives

This latest policy of Turkey is a supplement to a series of tariff regulations on Chinese car imports.In March 2023,Turkey announced an additional 40% tariff on electric vehicles imported from China,raising the total tariff to 50%.On June 8,2024,Turkey announced that the policy would be extended from electric vehicles to all imported Chinese cars (inclusive of passenger cars and commercial vehicles).),with a minimum tariff threshold of $7,000 for vehicles below this value,effective from July 8 this year.

Impact on Turkeys automotive market

Turkey’s "Economic Daily" previously reported that Chinese imported cars account for about 10% of the market share in Turkey,raising concerns among local business groups.The imposition of an additional 40% tariff on Chinese cars is intended to increase pressure on Chinese automakers and signal them to invest in production within Turkey."Turkish News Network" quoted an industry insider’s analysis,stating that the addition of a "tariff exemption" on top of the two previously announced additional tariffs is aimed at encouraging Chinese automakers,especially electric vehicle manufacturers,to invest in domestic production in Turkey.

Attracting investment from Chinese automakers

According to the new regulations,Turkey hopes to attract Chinese automakers to invest and establish factories through the tariff exemption policy.Industry insiders reveal that some Chinese automakers are already in negotiations with Turkey and have reached the stage of signing investment commitment letters.Once implemented,these companies will be exempt from additional tariffs,but if investments fail to materialize within the stipulated period,Turkey will revoke related incentives and tax exemptions in accordance with relevant laws.

Advantages of the Customs Union Agreement

Turkeys Hurriyet Daily News reported on the 6th that due to the Customs Union Agreement between Turkey and the EU,vehicles produced in Turkey can be exported to the EU without additional tariffs,which is positive news for Chinese automakers investing locally.However,despite favorable policies,some media outlets worry whether the frequent tariff policies might lead Chinese automakers to abandon the Turkish market.Turkeys TRT TV analysis suggests that although Chinese vehicles are gaining market share locally,the Turkish market is not indispensable in the global context.

Development of Turkeys electric vehicle industry

In recent years,Turkey has been vigorously developing the electric vehicle industry.According to data from the Turkish Automobile Distribution and Mobility Association,the sales share of pure electric vehicles in Turkey reached 6.8% in 2023.Local media reports indicate that electric vehicle sales exceeded 20,000 units in the first four months of 2024,and relevant institutions predict that the sales share of electric vehicles in Turkey will exceed 30% by 2030.

Data from the Turkish Electric and Hybrid Vehicles Association shows that as of December last year,Turkey had over 120,000 EV charging stations.In 2023,59 EV models from 27 brands were sold in Turkey.The chairman of the Turkish Automotive Dealers Federation,Erol Şahin,stated that the growing number of EVs in Turkey has significantly boosted awareness of electric vehicles,particularly benefiting the launch of the domestic brand Togg.