Automotive sector in Türkiye
• Machines • Industry • South-East European INDUSTRIAL Мarket - issue 3/2019 • 26.08.2019
Turkey`s automotive industry has longstanding traditions in the country and from assembly-based production gradually became an industry with R&D design capability and high added value.
The sector has been of key value to local production input over the years, with the partnerships established by foreign companies with Turkish entrepreneurs. Turkey is now the largest light commercial vehicle manufacturer in Europe and ranks 14th in the world in terms of automotive production output. The report “Turkish Automotive Industry Agenda” conducted by the Presidency of the Republic of Turkey Investment Office and EY in Turkey, profoundly researches the automotive industry in the country examining its historical development, current economical state, export opportunities, success stories and largest local and foreign companies in the sector.
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According to the study, Turkey`s automotive industry was established in the early 1960s. After rapid industrialization and progress the sector evolved from assembly-based partnerships to a full-fledged industry with design capability and massive production capacity. “Between 2000 and 2018, original equipment manufacturers (OEM) invested USD 15 billion in their operations in Turkey.
These investments significantly expanded their manufacturing capabilities, which in turn led Turkey to become an important part of the global value chain of international OEMs. Meeting and exceeding international quality and safety standards, today`s Turkish automotive industry is highly efficient and competitive thanks to value-added production”, the research adds.
The Turkish automotive sector maintains a significant share of so far completed global investments. In the period of import substitution, the country`s first investments acquired momentum with Turkey`s appealing investment possibilities along with globalization. Currently Turkey is home to nine global and seven domestic automotive industry producers that have completed their investments, as well as being an important supply network that is continuously developing. The Istanbul Chamber of Industry lists five automotive companies among the top 10 “Top 500 Industrial Enterprises of Turkey in 2017”, all of which are global leaders and centers of excellence in their respective fields.
The official report points out that in 2018, vehicle production in Turkey amounted to 1,55 million units. 85% of these vehicles were exported, and the rate of export from production increased by 7% when compared to 2017 rates, rising to about 1,318 million units in total. “On the basis of quantity, Turkish automotive industry manufacturers made a significant contribution to the balance of foreign trade by realizing exports totaling 32,2 billion USD in 2018”, the statistical information says.
According to data provided by the Turkish Exporters Assembly, among the top five exporting companies last year were four automotive companies. Ranking first in the export by industry list of 2018, the automotive industry has been repeating this achievement for 13 years in a row. During the same period, there were also significant increases in R&D employment and patent applications in the automotive industry; with 141 R&D and design centers, the automotive industry has become one of our largest industries hosting R&D and design centers.
Among the advantages of the industry are a competitive and highly-skilled workforce and a dynamic local market and favorable geographical location. In those conditions the vehicle production of 13 global OEMs in Turkey increased from 374 000 in 2002 to over 1,5 million units in 2018. This represents a compound annual growth rate (CAGR) of around 9 percent during that period, the country report calculates.
“Significant growth posted by Turkey`s automotive sector led to Turkey becoming the 15th largest automotive manufacturer in the world and 5th largest in Europe by the end of 2018.
Turkey has already become a center of excellence, particularly with respect to the production of commercial vehicles. By the end of 2018, Turkey was the number two producer of commercial vehicles (CVs) in Europe”, the document adds.
Turkey is home to many global suppliers. There are more than 250 global companies that use the country as a manufacturing hub. 28 of them rank among the 50 largest global suppliers. More and more foreign auto manufacturers choose Turkey as a production base for their export sales. “This is evidenced by the fact that 85 percent of vehicle production in Turkey was destined for foreign markets in 2018.
More than 1,3 million vehicles were exported from Turkey to foreign markets in the same year. In addition, Turkey was the number one vehicle exporter to European markets with 1,1 million units in 2018”, the statistics show.
Germany, France, Italy, the UK, and Spain are the major export customers of the Turkish automotive industry today. There is also a trend of diversification in export destinations with companies looking to break into nearby emerging countries where there is considerably more demand potential for new auto sales, the Turkish investment office explains.
“The rise of per capita income from USD 3000 in the first few years of the 2000s to around USD 11 000 in 2017 led to higher sales in the motor vehicles market. While the average annual sale figures in the market were around 360 000 in the early 2000s, the average sales increased to nearly 1 mln by 2017.
Despite the strong increase in the sales, the automobile penetration in Turkey - 150 cars per 1000 people as of the end of 2018 - is well behind the European average of 500. This indicates ample opportunities for carmakers in the domestic market. Increased purchasing power combined with a low automobile ownership rate should help drive automobile sales in the coming years”, the country report also says.
Research and design capacities
The Turkish automotive industry is constantly striving to improve its R&D, design, and branding capabilities. As of 2019, there are a total of 175 R&D and design centers operated by automotive manufacturers and suppliers in Turkey.
Among the global manufacturers that design, engineer, develop and manufacture products for the automotive sector in the country are Ford, Fiat, Daimler, AVL and Segula.
“Ford Otosan`s R&D center is one of Ford`s three largest global R&D centers, while Fiat`s R&D center in Bursa is the Italian company`s only center serving the European market outside its home country.
Meanwhile, Daimler`s R&D center in Istanbul complements the German company`s truck and bus manufacturing operations in Turkey. AVL Turkey, which opened up its 2nd R&D center in Turkey, started to develop autonomous and hybrid vehicle technologies”, the country`s investment agency states.
Turkey provides an excellent environment for the development of products and services through the whole supply chain. There are around 1100 component manufacturers which supply the productions of OEMs. The parts are usually going directly to the production lines of vehicle manufacturers. The localization rate of OEMs in the country varies between 50 and 70 percent.
R&D centers based in Turkey support not only the local operations, but also the operations in other plants of parent companies. “Ford Otosan`s R&D department is one of Ford`s 3 largest global R&D centers. The R&D center in Bursa is the only center of Fiat outside of Italy serving the European market. For Courier Ford`s light commercial vehicle, the Yenikoy plant is the sole production center in the world.
Toyota `s C HR and Corolla Hybrid models are produced in Turkey for world markets. Daimler R&D is the center of competence for some parts and carries global responsibility. With more than 50 thousand employees, automotive OEMs are one of the major employers in the manufacturing industry”, the official report further clarifies.
According to the market assessment made by the Automotive Distributors Association, automobile sales on the Turkish automotive market saw a 30,68% decline down to 379 274 units at the end of October 2018, compared to the same period of the previous year, when 547 109 automobiles were sold. Automobile sales, which recorded 70 488 unit sales in October 2017, declined to 16 809 units with a 76,15% fall in October 2018, compared to the same month of the previous year.
“Turkey`s proximity to Europe, Asia, Middle East and North Africa provides a strong competitive advantage as a logistics and exportation center. Future outlook underlines this advantage that Turkey seems to have. Upon closer inspection of the data, it transpires that the production output is expected to recover its transient plunge in 2018, turning the tide to an upward increase from 2019 to 2024, reaching approximately 2 million units by 2024", the Turkish Investment Agency states.
As the European market continues to recover its former power after plunging to all-time low volumes in the wake of the 2008 and 2012 crises, a relative growth is expected in Turkey`s automotive exports outlook until 2027. It is estimated that vehicle sales in the EU will reach 17,8 million units with a 5,4% average growth in 2018 and will reach an annual growth rate of 4,1% on average in the period between 2018 and 2027, the Agency`s statistics further show.
Big automobile manufacturers such as Hyundai Motor, Fiat Chrysler Automobiles (FCA) and Toyota Motor continue to invest in Turkey with increased production capacities according to the 5-year forecast period until 2027, the Turkish Investment Agency notes. “These investments will make a 0,9% contribution to the average annual growth in the passenger car production in Turkey between 2018 and 2027.
Renault Motor is also planning to carry out more of the Clio subcompact vehicle manufacturing operations in Turkey”, the Agency`s report says. According to this new production plan, 94% of the global production of the Clio model of the French automaker will be carried out at the facilities in Turkey and Slovenia.
In addition, Toyota Otomotiv, the Turkish affiliate of Toyota Motor, notably increased the production volume of its Turkish manufacturing operations with the release of a new SUV model in 2017. The company invested a total of 350 million EUR (396 million USD) in its Sakarya manufacturing facility as part of a larger investment program valued as much as 470 million USD. The program aims to foster Toyota`s annual production capacity from 150 000 vehicles to 280 000 vehicles per year.
The above mentioned SUV model is the first hybrid car which will be mass-produced in Turkey. “Earlier, in November 2014, Turkish automotive manufacturer, Tofas, owned by Koc Holding and FCA in Turkey made an additional investment amounting to 480 million USD on top of an investment of 520 million USD as announced earlier, in the manufacturing of new passenger cars until 2023. The ultimate purpose of the investment is to boost Tofas`s production up to 700 000 units per year in the new hatchback and station wagon models”, the cited earlier report adds.
Ford Otosan has the entire required capacity and infrastructure to design, develop and test a complete vehicle including its engine, from the stage of white paper to the launch of a commercial product. The company developed its first major project, Transit Connect model following the establishment of equal partnership with Ford in 1997, and in 2003, the company developed Ecotorq, the new Cargo truck and brand new heavy vehicle engine.
The car manufacturer claims it is working on advanced technologies to offer products which can compete not only in Turkey but also in all potential export markets including Europe and North America. “Having realized engineering exports with more than 1200 R&D engineers, Ford Otosan has the largest R&D organization of the Turkish automotive industry.
On behalf of Ford Motor Company and Ford Otosan, many different ongoing projects are being conducted for the development of engines, engine systems, body and inner space. Particularly the focus is on fuel economy and emission optimization, driver support systems, development of test processes and analytic methods”, the local Investment Agency`s research says.
Ford Otosan considered “the exports champion of Turkey” received the first prize in the category of “Architecture, Engineering, Scientific and Other Technical Services” in 2015 and 2016 in the survey “Turkey`s 500 Largest Service Exporters” organized by the Turkish Exporters` Assembly (TIM). The company`s total engineering exports have reached 578 million US Dollars since 2010. In matters of engineering exports, the company won Ford Motor Company`s most prestigious award “Henry Ford Technology Award” in 2017.
Ford Otosan carries out 4 different projects supported by the European Union. Different autonomous vehicle systems up to Level 4 are being developed within the scope of these initiatives. “Ford Otosan is responsible for all steps and development of the necessary software from the selection of autonomous vehicle sensors to signification of the data received from the sensors and then autonomous control of the vehicle”, the report clarifies.
Ford-Otosan also works in the field of electrification – from hundred percent electric cars to hybrid solutions in all vehicle segments in its manufacturing program. The developments scope includes electric vehicles` software and control, design and simulation at component and system level, and development of product and infrastructure strategies. The components` design and production strategies are developed and implemented by taking into account the value chain of electric vehicles, the company further explains.
Ford Otosan signed a technology licensing agreement with the Chinese Jiangling Motor Corporation (JMC) in 2013 and undertook a creative campaign under this partnership. “With the agreement, Ford Otosan has granted a license for the manufacture of its 100% intellectual property rights-owned Ecotorq engines in China -the largest truck market of the world- for JMC brand vehicles. In 2014, another license agreement was signed with the same company for the transmission, cabin and parts technology of our existing trucks.
With this agreement, in addition to license income, the opportunity of exporting engineering to China has also been obtained”, the country report adds.The engineers of the two companies are jointly working on the localization of existing parts, adapting them into the Chinese market and commissioning. “JMC Weilong” trucks were designed with support from Ford Otosan engineers within the scope of the technology licensing agreement with JMC for the manufacture of the trucks developed completely (including the engine) by Turkish engineers of Ford Otosan. The truck was launched in China, the world`s largest truck market, in 2017", the Turkish Investment Agency points out.
Farplas won the first prize in the Inovalig Innovation Leaders contest at the end of 2017 among 971 companies. F+ Ventures is the Fark Holding`s new corporate capital-based company established for investing in intelligent transportation technologies in order to adapt to evolving technologies and integrate innovations into conventional business models.
The company has invested 4,5 million dollars for start-ups so far. “Our first investment, Comodif is an internal venture of Fark Holding, and it has achieved a groundbreaking project on digital transformation of connected vehicles in Turkey. Our objective is to explore the technology and companies that will radically change the transportation industry and improve the quality of transportation and life for people. Companies will begin downsizing and even disappearing unless they turn towards technological and high value added products and markets”, Farplas explains.
The manufacturer wants to turn F Plus into a platform in which the entire transportation ecosystem can jointly invest. The main objective is to make F Plus one of the first name remembered for intelligent transportation in the world, the company adds.
Farplas is using and developing production technologies for value added products in the automotive sector. The company is commissioning painted, coated pieces and new materials. It has also used COD, wrapping and Mucell technologies for the first time in Turkey. It is also conducting system integration with composite materials with the objective of reducing weight, while also working on creating a technology radar with the Fraunhofer Institute.
The digital transformation of the manufacturer is carried out through projects and initiatives in different fields – from product design to the last point of production in order to realize productivity and high quality expectations. The company is working with main industries for vertical integration efforts. It is also increasing its savings by conducting sample application projects of Industry 4.0 technologies.
Farplas has begun obtaining results in the fields such as data analytics, visualization with camera, and integration of processes. It is actively participating in Bogazici UniversityIndustry 4.0 Platform as well.
The focus is to use open innovation and synergy intelligence. The innovation strategy of the manufacturer is to realize improvements to ensure process efficiency, become a strategic business partner of our existing customers with innovative and value added products, and learn and develop new technologies in transportation.
“We have configured our innovation efforts under a directorate: Strategy, R&D and Innovation. We are coordinating our Digital Transformation efforts under this structure. We are supporting transformation with innovation through cultural transformation. We are also including our employees in these efforts in the most effective way through our internal entrepreneurship contests”, the company informs.
Comodif, as one of Farplas internal ventures, has delivered the solutions it has developed for connected vehicles to users through Fiat Tofas and Turkcell so far. F+ Ventures constitutes the company`s investment branch in new fields.
The Transportation Technologies and Intelligent Automotive Systems Application and Research Center (TTIS) with the Okan University was founded in 2009. The university started the first studies on intelligent and communicating vehicles in Turkey. In collaboration with OTEP, the first Intelligent Transportation and Intelligent Vehicles Strategy Plan of Turkey was issued. TTIS is the only member of ERTICO (the European Intelligent Transportation System organization) in Turkey.
Turkey`s first domestic autonomous car was developed at Okan University. The university was also part of Turkey`s first communicating vehicle research project. It is the only Turkish university with membership at UTAS EGVIA (European Green Vehicles Initiative Association) as well. Prof. Orhan Alankus is included in the Board of Directors of the Intelligent Transportation Systems Association as (AUSDER) founder member (representing universities).
TTIS intends to be a “World-renowned information and research center”, and a “Center of Excellence in the field of Intelligent Transportation Systems by 2020”. The main research areas of the institute include: intelligent vehicles, autonomous vehicle technologies, communicating vehicles, intelligent energy management systems, battery packaging and management systems, electric machine and inverter development, traffic management, big data and cloud technologies, simulation systems, etc.
The Transportation Technologies and Intelligent Automotive Systems Application and Research Center (TTIS) with the Okan University has participated in the following studies related to intelligent vehicles and energy systems: OKANOM-Okan Autonomous Vehicle Project; SAE Level 3 Autonomous Vehicle Development Project Intelligent and Communicating Energy Management System; Productivity Increase Feasibility Study with Intelligent Transportation Systems Application on Metrobuses; OPTITRUCK, HORIZON 2020 Project, etc.
Among the various technology fields that the institute works in are: hydraulic steering wheel system with intelligent power support, intelligent vehicle computers, active driver fatigue sensor systems, unmanned land vehicle platform design and realization for industrial and militaristic use with high maneuvering capability, open innovation autonomous vehicle development and testing platforms, dynamic and modular intelligent battery management systems, etc.
The research unit is also developing innovations in the areas: intelligent renewable energy management systems, battery management systems for hybrid and electric vehicles, electrical vehicle batteries with significantly increased energy density and efficiency, intelligent battery management systems which provide high efficiency and performance for electric vehicles, SEPIC LED driver with high efficiency and variable output voltage, etc.
Global companies with local operations
AVL - established by Hans List in 1948 in Austria, the company employs more than 9000 engineers in its over 40 affiliates. It`s the world`s largest independent company for the development of powertrain systems with internal combustion engines as well as instrumentation and test systems. AVL has an office in Istanbul with 250+ engineers. It claims it aims to become a global engineering hub.
One of the two exporting affiliates of AVL started to work on Hybrid and autonomous car technologies. The company is also supported by Tubitak for its works on electric and autonomous car projects.
FEV - established in 1978 in Aachen, Germany, FEV employs 4000 researchers and developers. Focusing on powertrain components engineering (mainly engine turbo charger and transmission), the company expanded into Turkey in 2011 with 10 engineers working in the local office. The main focus of the company`s business is design and R&D consulting of powertrain and ICE for the automotive sector. FEV also works on design, simulation, software development, and engine/vehicle calibration. The unit dedicated to this job consists of more than 50 engineers.
Idiada - the company was established in 1973 with headquarters in Santa Oliva, Spain. It currently employs more than 2100 workers. Idiada is present in 25 countries, focusing on design, testing, engineering, and certification services in the automotive sector.
The enterprise expanded into Turkey in 2000 with an engineering office. The focus of the company is on testing of R&D consulting for the automotive industry.
Ricardo - this company was founded in 1927 with headquarters in Shoreham by Sea, England. It now employs approximately 3000 engineers. Ricardo is operating in 15 countries with focus on engines, transmissions, and intelligent transportation systems. It works in collaboration with the Turkish engineering house Anova in the field of powertrain development and R&D consulting in Turkey.
Ford - the foundation of Ford`s first factory was laid in 1959. The company has total capacity of production of 415 000 cars per year. The Turkish affiliate is considered the commercial vehicle manufacturing hub of Ford Europe. The company also owns Turkey`s largest R&D center located in a single campus in Istanbul. It exports worth USD 4,8 billion in 2017 to 83 countries. It is also one of the 3 largest R&D centers of Ford Global.
Renault - the Turkish unit is one of the biggest factories of Renault with annual production capacity of 375 000 cars and 750 000 engines. Its total exports in the last 15 years exceed USD 30 billion. It has been a flagship company in passenger car production for years with over 6300 employees, almost 1500 of which are white-collar.
Fiat - the facility was established in 1968 and has the capacity of 450 000 vehicles per year. It currently employs more than 9000 workers. It`s the only factory in Turkey that manufactures both passenger and light commercial vehicles. The R&D center in Bursa is the only center of Fiat outside Italy serving the European market.
Hyundai - the company stepped into the Turkish market in 1990. It started to manufacture in 1997 in its Izmit factory. Hyundai Turkey has a total production capacity of 245 000 vehicles annually. It employs more than 3000 workers. The company is positioned as the global brand`s manufacturing hub for European markets.
Toyota - it has invested almost USD 2 billion since entering Turkey. It currently has over 3500 employees, and a 280 000 cars annual production capacity. Almost 85% of the production is being exported to more than 50 countries. The local affiliate started the production of first two hybrid vehicles in Turkey, C-HR and Corolla Hybrid, with an investment that exceeded EUR 500 million in total.
Mercedes - the global company is operational in Turkey since 1967. The production started in 1968 and the first export was in 1970. Mercedes has now two facilities in the country – a bus factory in Istanbul and a truck factory in Aksaray. The total investment of the company in Turkey amounts to EUR 1 billion and the staff numbers over 6000 employees.
Honda is operational in Turkey since 1992. The production of the company`s Civic model started in 1997. In its Izmit factory it has an annual production capacity of 50 000 cars with over 1500 employees. The global car manufacturer has invested almost USD 500 million since the establishment of its Turkish operations. It now exports the Civic series to 46 countries throughout the world.
MAN - the German giant began operations in Turkey in 1966. There was founded its first factory outside Germany. It is the largest integrated bus company of MAN Global with 2000 units annual bus production capacity and over 2000 employees. The Turkish subsidiary is the production base of the company`s premium Neoplan bus brand. It also exports to 41 countries including European ones.
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