Growth of Turkish

Automotive Industry
between 2000–2010
Term Project Final

Middle East Technical University

ECON105 Introduction to Research Methods I
Assignme Term Project Final
nt:
Date: 6.1.2011
Instructor:Dr. Osman Gülseven
Students: Çiğdem Ayşenur Şafak (1539469) i
Emel Yavuz (1539287)
Abstract

In this study, the growth of the automotive industry in Turkey between 2000 and 2009 will
be examined in a general view. The improvement of the sector and other important things
related to the Turkish automotive sector such as development of the European automotive
industry or the development of other major areas automotive industries between 2000 and
2009 will be examined. Our main purpose is to see whether the global and local economic
crises have affected automotive sectors like all sectors, and whether the Turkish
automotive sector has become an essential part of the global production. We present
results from quantitative analyses on data from a variety of sources, which basically confirm
most of our hypotheses in this direction.

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Abbreviations

Terms

GDP: Gross Domestic Product

USD: United States Dollars
TRY: Turkish Lira

Organizations

OSD: Automotive Manufacturers Association (Otomotiv Sanayi Derneği)

OICA: International Organization of Motor Vehicle Manufacturers
ACEA: European Automobile Manufacturers Association
CLEPA: European Association of Automotive Suppliers

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Contents

Abstract..................................................................................................................ii

Abbreviations.........................................................................................................iii

List of figures..........................................................................................................v

Introduction............................................................................................................1

1.1. Problem description and importance of study..............................................................1

1.2. Organization of the paper............................................................................................1

Literature review....................................................................................................2

Data........................................................................................................................4

General developments in Turkish automotive industry...........................................5

1.3. Global market, Europe, and Turkey..............................................................................5

1.4. Exports to global market..............................................................................................8

Main factors affecting development........................................................................9

1.5. Financial crises.............................................................................................................9

1.5.1. 2001 local financial crisis.......................................................................................9

1.5.2. 2008 global crisis.................................................................................................10

1.6. Exchange value of the Turkish lira.............................................................................11

Conclusions...........................................................................................................12

References............................................................................................................14

iv
List of figures

Figure 2.1 Car ownership and GDP per capita. From Haugh, Mourougane and Chatal (2010).
2

Figure 3.2 World automotive production (car and commercial vehicles) statistics for 2009.
(Haugh, Mourougane and Chatal 2010)..................................................................4

Figure 4.3 World motor vehicle production by region between 2000 – 2009. Source: (OICA
2010)......................................................................................................................6

Figure 4.4 Vehicle Production in Europe by Country in 2009. Source: (OICA 2010). 7

Figure 4.5 Percentage Growth of Production in Turkey and Europe between 1998 – 2009.
Source: (OICA 2010)...............................................................................................8

Figure 4.6 Total Automotive Export and Import of Turkey between 2000 – 2009. Source:
(OSD 2010).............................................................................................................8

Figure 5.7 Growth of Turkish Automotive Industry and GDP between 1998 – 2009. Source:
(IMF 2010)..............................................................................................................9

Figure 5.8 Comparison of the GDP and automotive production of Turkey for the period 1999
– 2010. Sources: (IMF 2010, OSD 2010)................................................................10

Figure 5.9 Percentage of World Motor Vehicle Production by Region in 2008. Source: (OICA
2010)....................................................................................................................11

Figure 5.10 Percentage of World Motor Vehicle Production by Region in 2009. Source: (OICA
2010)....................................................................................................................11

Figure 5.11 Growth of Export and Automotive Production in Turkey with Respect to Change
of TRY/USD. Sources: (TURKSTAT 2009, OANDA 2010, OICA 2010)......................12

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Introduction

1.1. Problem description and importance of study

In this research, we will look at the development of the Turkish automotive industry in
general, how and when it has started to improve, and what factors have affected its
improving. The selected subject is very extensive, so we will limit our research with the
last ten years. This selected time period is also interesting because it covers two very
significant financial events, namely the 2001 financial crisis in Turkey and the 2008
global financial crisis.

Automotive industry, i.e. the design, manufacturing, and marketing of the motor
vehicles, comes first in the economies of the developed countries. Also the automotive
industry leads the technological improvement of countries in general and is closely
related to many other sectors including raw material industries such as iron, steel, and
gum. Because of being such an important sector and having a large share in the
production and trade, Turkish automotive industry is chosen as an interesting research
subject.

The state of the industry in Turkey will be our main concern and we will concentrate on
quantitative data from various sources and we intend to reach some interesting
inferences after evaluating our data. Our research will have the following two
hypotheses: that the global economic crisis has affected the automotive sector but there
is still an export surplus; and that the Turkish automotive sector has become an integral
part of the global network of production bases.

1.2. Organization of the paper

We will start by providing a review of existing research on the subject in Section 1.2. A
brief overview of the sources of quantitative data that we use in the research is given in
Section 1.2. We present our main research results about the general developments in
the Turkish automotive industry in Section 1.2 and about the main factors affecting the
development of the industry in Section 1.4. The paper closes with our conclusions in
Section 1.6.

1
Literature review

Firstly, looking at the subject in a general view, because of the size and importance of the
automotive industry, research literature involving the history, development, and current
status of the industry, such as general references on the main trends are widely available.
Sources like Chiu (2008), for example, give an overview of the evolution of the car together
with the production industry and consumer market. Plunkett (2010), gives information
about the current trends in the industry, results of market research, and data about the
leading companies. Reports such as Haugh, Mourougane and Chatal (2010) shows the
relation between the development level of economies and the state of car consumption (see
Figure 2.1 for an example). These studies also give valuable information about the position
of Turkey within the world, both as a consumer and as a producer of cars.

Figure 2.1 Car ownership and GDP per capita. From Haugh, Mourougane and Chatal (2010).

If we consider the 2008 global financial crisis and its effect on the global market, a very
remarkable review of the automotive industry in the developed countries is given by several
OECD (Organization for the Economic Cooperation and Development) working papers.
Haugh, Mourougane and Chatal (2010), for instance, give detailed information about the
state of the industry, including the reasons for the collapse in car sales at the beginning of
the crisis, policy measures, and effects of the global crisis. They also give medium and long
term projections about industry performance and sales. Statistical data, which are
especially useful for our study, are widely available, such as data on world motor production
by countries and vehicle types (OICA 2009) and local production capacities and financial
aspects (OSD 2010), allowing us to use quantitative methods to see exactly what has
happened from the past to the present. The most important organizations that publish
statistics about the automotive industry globally and in Turkey are as follows:

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• OSD – Automotive Manufacturers Association (OSD 2010)
• OICA – International Organization of Motor Vehicle Manufacturers (OICA 2009)
• ACEA – European Automobile Manufacturers Association (ACEA 2010)
• CLEPA – European Association of Automotive Suppliers

Studies like Wells (2010), on a different topic, give information about the environmental
aspects of the global growth in automotive industry.

For research literature about the general trends in the automotive industry in Turkey,
especially for the last ten years, there are published surveys measuring the development
and performance of the industry, such as export statistics (Bedir 2002, OSD 2010). Data
such as these are useful for searching for correlations within the factors affecting the
development in a quantitative way. There are also several studies analyzing domestic sales
figures, a very important factor in the revenues of Turkish automotive manufacturers (Bedir
2002, OSD 2010). Additionally, the subject is covered in thesis works, which mostly give
information about the industry in a local perspective, and sector analysis reports from
Turkish organizations (Şah 2007).

Another important theme for research is the effect of the recent financial crises (both the
2001 financial crisis in Turkey and the global crisis of 2008) on the automotive industry. In
a World Bank working paper on the subject, Van Biesebroeck and Sturgeon (2010), for
instance, give information about the impact of the crisis in leading production countries or
regions, trends leading to the crisis, and different development strategies after the crisis.
Research covering the effects of 2008 global crisis on the Turkish automotive sector are
also available in the two thesis works mentioned before (Toydemir 2008, Sarıboğa 2008),
allowing one to look at the change of rate in exports and imports with the crisis.

Published statistical data about motor vehicle taxes, such as the data by the Revenue
Administration of Turkey (2010), can also be considered an important part of existing
literature, because we will interpret these for understanding how taxes affect production
and consumption in the sector.

3
Data

In this study, the main data relates to the growth of the automotive industry in Turkey
between 2000 and 2009. The improvement of the sector and other important things related
to the sector such as development of the European automotive industry or the development
of other major areas automotive industries between 2000 and 2009 should also be
quantitatively examined. We use graphs and charts to create a better look and to explain
the data in a proper way.
For data about Turkey, our base sources will be statistics published by major organizations
(OICA 2009, OICA 2010, IMF 2010, OSD 2010), working papers by OECD (Haugh,
Mourougane and Chatal 2010), master theses (Sarıboğa 2008, Toydemir 2008) and sector
analysis reports from Turkish organizations (Şah 2007). Some organizations that publish
statistics about the automotive industry in Turkey and in the world that we will use in our
research:

1. OSD – Automotive Manufacturers Association (Otomotiv Sanayi Derneği)

2. OICA – International Organization of Motor Vehicle Manufacturers
3. ACEA – European Automobile Manufacturers Association
4. CLEPA – European Association of Automotive Suppliers

Figure 3.2 World automotive production (car and commercial vehicles) statistics for 2009.
(Haugh, Mourougane and Chatal 2010).

4
General developments in Turkish automotive
industry

In this section, we will look at the automotive industry in a general view. How has this
sector developed? What keeps the development going? Besides, we will examine the
general trends in the last ten years for the automotive industry in the whole world and
specifically in Turkey.

A view of the automotive production of Turkey in a global and European perspective, and a
comparison of these all are given in Section 4.1; and the following sections of 4.2 and 4.3
relate to the exports and the domestic consumption of Turkey.

1.3. Global market, Europe, and Turkey

Because Turkey has a considerably low contribution to the total automotive production
of the world and it is so hard to see and visualize this little effect, and to put things into
the larger perspective, we start by the total production numbers of main regions of the
World (Africa, America, Europe, and Asia-Oceania) between 2000 and 2009 (Figure 4.3),
and then continue to the share of Turkey within the European production figures. Turkey
is an integral part of Europe and also has a considerable share in total production
(Figure 4.4) (OICA 2010).
Africa has a very small share in production of the automotive compared with the other
major areas. South Africa and Egypt have the most of production in whole Africa.
America has been a major manufacturer in automotive production. NAFTA members
(Canada, Mexico, and United States of America) have a very big share in the total
production of the America. Countries in South America however are not very effective in
the production. From 2000 and 2007 there is not a big production change, there are
some little decreases and increases. But after 2007 production starts to decrease and in
2009 production decreased to a level which hasn’t been reached for many years.
Because of the global crisis automotive industries like many other industries face a
recession.
Production of Europe, like America, is not very fluctuant between the 2000 and 2007.
Increases and decreases are not very remarkable. However after 2007, again like
America, automotive production of Europe starts to decrease rapidly. In 2009 production
is at a very low level because of the global crisis. Germany, France and Spain have the
most part of production in Europe.
After 2002 Asia shows a very significant improvement. Production is getting better and
better year after year. Even during the global crisis production of Asia does not

5
 decrease, actually it increases. Because of some reasons, for example, the increasing
demand for low cost vehicles in some countries such as China and India; and
expectations about potential markets such as Thailand and Malaysia, automotive
production has increased rapidly in that region (RNCOS 2007). China, Japan and the
South Korea are taking the lead of automotive production in recent years.

Figure 4.3 World motor vehicle production by region between 2000 – 2009. Source: (OICA
2010).

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Figure 4.4 Vehicle Production in Europe by Country in 2009. Source: (OICA 2010).

We continue by comparing the production of growth in automotive industries in Turkey

and Europe by percentage (Figure 4.5). Between 2000 and 2001, Turkey has a very
rapid decrease; we can obviously see the crisis of 2001 just affected Turkey. Europe
generally has very little fluctuation until 2007. The global crisis affected whole Europe
including Turkey. Also we can see that other counties were affected in 2007 but Turkey
was affected about one year after that (OICA 2010).

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Figure 4.5 Percentage Growth of Production in Turkey and Europe between 1998 –
2009. Source: (OICA 2010).

1.4. Exports to global market

We will measure the development and performance of the industry mainly by export
statistics (Bedir 2002, OSD 2010) and correlate this data with the factors affecting the
development in a quantitative way.

Figure 4.6 Total Automotive Export and Import of Turkey between 2000 – 2009. Source:
(OSD 2010).

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Main factors affecting development

1.5. Financial crises

Another sub problem we cover are the effects of 2008 global crisis on the Turkish
automotive sector. We first look at the change of rate of exports and imports with the
crisis. To begin with, we will consider the 2001 Turkey financial crisis (Toydemir 2008,
Sarıboğa 2008, Van Biesebroeck and Sturgeon 2010) in Section 5.1.1 and the 2008
global financial crisis (Haugh, Mourougane and Chatal 2010) in Section 5.1.2.

1.5.1. 2001 local financial crisis

Comparing the changes in total GDP and production of automotive industry (Figure
5.7), and their actual values (Figure 5.7), help us to see the effect of this sector and
what its yield is in total. We can also see here the effects of the 2001 local crisis and
the later global crisis. Both GDP and production decreases in these years. We
calculated the correlation coefficient to quantitatively see the relation between these
two concepts. The result, 0.83830, is very close to +1, so this means that GDP and
production are positively related to each other. When one of them starts to increase
the other also increases and vice versa (IMF 2010).

Figure 5.7 Growth of Turkish Automotive Industry and GDP between 1998 – 2009.
Source: (IMF 2010).

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Figure 5.8 Comparison of the GDP and automotive production of Turkey for the period
1999 – 2010. Sources: (IMF 2010, OSD 2010).

1.5.2. 2008 global crisis

If we plot the two pie charts in Figure 5.9 and Figure 5.10 to display the whole
market production and the percentage of regions’ production in 2008 and 2009, the
effects of the global crisis can be seen easily by looking of these: in 2008 America
has a 24% share and Europe has a 31% share of the total world production but the
next year they both lose their production share; while Asia-Oceania increases its
production percentage. We can also see which region is much more effective in the
production by looking at the charts, and it is of course in both two years Asia-
Oceania (OICA 2010).

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 Figure 5.9 Percentage of World Motor Vehicle Production by Region in 2008.
Source: (OICA 2010).

Figure 5.10 Percentage of World Motor Vehicle Production by Region in 2009.

Source: (OICA 2010).

1.6. Exchange value of the Turkish lira

11
 Another particularly important factor affecting any sector which exports its manufacture,
and more than so especially for the automotive industry, is the exchange value of the
Turkish lira against other currencies. Here we quantitatively examine the value of the
Turkish lira in terms of US Dollars during the selected time period and to reach
inferences about any correlations in our data.
We plot the relationship between these three concepts which are change of TRY/USD
(the value of 1 Turkish Lira in terms of US Dollar), the change of total export, and the
change of automotive production (Figure 5.11). The correlation coefficient that we
compute between total export and automotive production is 0.94362 and the fact that
this is so close to +1 is an expected result, which means that the automotive production
has a very important effect on and follows the general trends in the total exports of
Turkey.
The other correlation coefficients that we compute are between the exchange value of
the Turkish Lira (against US Dollar) and the total exports; and the exchange value of the
Turkish Lira and the automotive production in Turkey, which are -0.44509 and -042427
respectively. These correlation coefficients give us the result that both the total exports
and the automotive production are slightly inversely related to the international value of
Turkish Lira, which means that generally a low value of the Turkish Lira is favorable to
the exporting industries (OICA 2010, TURKSTAT 2009, OANDA 2010).

Figure 5.11 Growth of Export and Automotive Production in Turkey with Respect to
Change of TRY/USD. Sources: (TURKSTAT 2009, OANDA 2010, OICA 2010).

Conclusions

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In this study we saw how Turkish automotive industry is significant in Europe and all over
the world; export and import values gave remarkable results to evaluate our main problem.
At the beginning of this paper, it was assumed that global and local economic crises have
affected automotive sectors like all sectors but there is still an export surplus in the sector
under study and the second thing assumed is that Turkish automotive sector has become
an integral part of the global network of production bases. We believe that quantitative
analyses on data from a variety of sources have confirmed most of our hypotheses in this
direction.

There are some parts that this research does not cover, especially the history of the
development of this very extensive industry beyond the selected time period of the nearest
decade; and the engineering part of industry. We suggest the future researchers to inspect
these areas.

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References

ACEA. "Statistics." European Automobile Manufacturers' Association. 2010.

http://www.acea.be/index.php/collection/statistics (accessed November 10, 2010).

Bedir, Atilla. "Türkiye'de Otomotiv Sanayii Gelişme Perspektifi." Vol. DPT:2660. Republic of
Turkey Prime Ministry State Planning Organization, November 2002.

Chiu, Imes. The Evolution from Horse to Automobile: A Comparative International Study.
New York: Cambria Press, 2008.

Haugh, David, Annabelle Mourougane, and Olivier Chatal. "The Automobile Industry in and
Beyond the Crisis." OECD Economics Department Working Papers, 2010.

IMF. "World Economic Outlook Database." International Monetary Fund. October 2010.
http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/weoselgr.aspx (accessed
December 8, 2010).

OANDA. "Average Exchange Rates." OANDA Corporation. 2010.

http://www.oanda.com/currency/average (accessed December 8, 2010).

OICA. "OICA 2009 Production Statistics." International Organization of Motor Vehicle

Manufacturers. 2009. http://oica.net/category/production-statistics/ (accessed
November 10, 2010).

—. "Production Statistics." International Organization of Motor Vehicle Manufacturers. 2010.

http://oica.net/category/production-statistics (accessed December 8, 2010).

—. "Production Statistics." International Organization of Motor Vehicle Manufacturers. 2010.

http://oica.net/category/production-statistics (accessed December 8, 2010).

OSD. "General and Statistical Information Bulletin of Automotive Manufacturers 2010 - I."
Automotive Manufacturers Association. 2010. http://www.osd.org.tr/cata2010.pdf
(accessed November 10, 2010).

OSD. Otomotiv Sanayiinde Dış Ticaret (1992-2009). RAPOR 2010/2, Ankara: OSD, 2010.

Plunkett, Jack W. Plunkett's Automobile Industry Almanac 2011: Automobile, Truck and
Specialty Vehicle Industry Market Research, Statistics, Trends & Leading Companies.
Plunkett Research, Ltd., 2010.

14
Revenue Administration of Turkey. Tax statistics. 2010. http://www.gib.gov.tr/index.php?
id=271 (accessed November 10, 2010).

RNCOS. "Asian Automotive Industry Outlook (2007-2011)." 2007.

http://www.automotiveuniverse.net/reports/asianautomotiveoutlook.pdf (accessed
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Şah, Ömer Faruk. Türkiye Otomotiv Sektörünün İhracat Performans Analizi. Ankara, 2007.

Sarıboğa, Nursel. "Türkiye Otomotiv Sektörünün Gelişimi ve İhracatı Artırma Stratejileri

(Master Thesis)." İstanbul, 2008.

Toydemir, Yelda. "2001 Krizinin Firmaların Mali Yapıları Üzerine Etkisi, Otomotiv Sektörünün
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TURKSTAT. "Foreign Trade Statistics." Turkish Statistical Institute. 2009.

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Van Biesebroeck, Johannes, and Timothy J. Sturgeon. "Effects of the Crisis on the
Automotive Industry in Developing Countries." World Bank Working Papers, 2010.

Wells, Peter. The Automotive Industry in an Era of Eco-austerity: Creating an Industry as if

the Planet Mattered. Northampton: Edward Elgar Pub., 2010.

15