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Economy

Turkish auto exports expected to hit record high in 2017

Demand from Europe strong, but domestic sales sag amid political turmoil, sluggish tourism, weak lira

Honda cars are assembled at the automaker's plant in Kocaeli, western Turkey.

ISTANBUL -- Turkish auto exports are on course to hit record levels this year, with the figures for the first six months rising 29% from the same period last year to some 710,000 units, including trucks and buses, according to data by the Turkish Automotive Manufacturers Association (OSD).

Production is also growing -- about 870,000 units were made in the six-month period, a 20% increase on the year -- and is expected to hit a record high for the full year.

Domestic sales, by contrast, shrank by 9% during the six months due in part to stagnant demand from businesses.

The auto industry has been calling on the government to introduce measures to stimulate demand.

OSD Chairman Kudret Onen has upgraded his full-year outlook for production and exports by 50,000 units each to 1.7 million and 1.4 million units, respectively. He expects the expansion of the European market and the introduction of new models will help boost the figures.

Last year, a total of 1.48 million vehicles were produced in Turkey and 1.14 million units were exported, both record highs for the second consecutive year. The latest estimates are far greater than these results.

Turkey and the European Union have a customs agreement that allows Turkey to export vehicles to EU countries without tariffs. As a result, Turkey has been an auto production base for the EU.

The total value of Turkish auto exports, which include vehicles and auto components, was up 22% to $14.5 billion. While exports of vehicles jumped 35% to $9.8 billion, parts exports grew a mere 2% to $4.7 billion.

Automakers introduced many new models last year, such as the Egea compact car (sold as the Tipo in Europe) by Fiat, a unit of Fiat Chrysler Automobiles, the C-HR sport utility vehicle by Toyota Motor, and Honda Motor's Civic. Automakers also increased production of their existing models last year.

The momentum has continued into 2017. Toyota's exports more than quadrupled in the first six months to some 130,000 units. The C-HR is now being exported to North America and Taiwan from Turkey. Honda also saw its exports increase almost fourfold to 4,606 units in the same period.

While strong exports pushed up production, domestic sales fell 9% to 410,000 units. The slowdown is blamed on private companies holding back unnecessary or nonurgent investments as the government has extended the state of emergency put in place after a failed coup attempt last July.

Other reasons include a sluggish tourism industry, a higher special consumption tax rate since November and a fall in the value of the Turkish lira, which has been pushing up auto prices. In particular, the number of large trucks and other large commercial vehicles sold in Turkey fell about 20% in the first six months.

OSD Chairman Onen expects growth to ease in the European and American markets, underscoring the need to revamp the domestic market in order to reduce excessive reliance on overseas demand.

The Turkish government has introduced tax incentives for the buyers of domestic appliances in a bid to boost consumption. Onen has been urging the government to introduce similar tax incentives as well as measures to spur replacement demand among owners of old models and to help build a car-leasing industry for businesses.

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