Despite the economic and financial crisis: The car market is overheating in Turkey. In times of high inflation, many people look for new forms of investment. This is how cars become objects of speculation.
New car sales in Turkey have been reaching new highs for the past nine months. The latest figures for May: Almost 87,000 new registrations – monthly record. According to figures from the Turkish Association of the Automotive Industry (OSD), the industry has grown by almost 70 percent since the beginning of the year.
Impatient buyers in the dealerships
Visiting Murat Aksoy’s car dealership in Istanbul’s BostancI district. Cars in the higher price range are sold here. The dealer is very satisfied with the current sales. “Business is booming,” he says. In the current economic situation in the country, customers would see the car as an investment, just like gold or foreign exchange.
However, the high demand creates a problem: At the moment, it takes three to six months for many models until new cars can be imported and end up with the customer. The reason for this is the high demand. However, many buyers are very impatient and want to strike immediately, says Aksoy. The used car dealer will then benefit from this just a few kilometers away.
“We buy and sell dear”
Things couldn’t be better for domestic models either: Alper Kanca is a car professional – the 60-year-old helped set up the automotive supplier association TAYSAD. In the meantime, this network on the outskirts of Istanbul has become a success story. 90 industrial companies, kindergartens, schools, a connection to the motorway and even a fire brigade are bundled there in an industrial area. Work is done in three shifts, and around one percent of Turkish exports are processed from there.
Kanca sees two reasons for the boom: On the one hand, the Turkish auto industry is currently producing a large number of vehicles and is able to satisfy the market. And: People have realized that “the sooner they buy, the less their money loses value,” says the business boss. “We buy expensive and sell expensive,” says a new car customer when asked in the car shop.
Confused consumers
Fearing devaluation and inflation, many Turks are drawing on their cash reserves. The tax increase at the beginning of July also creates uncertainty. The tax rate for goods and services has now risen to 20 percent. The Turkish lira has lost almost 70 percent of its value in a year. Inflation is officially 38 percent, but according to estimates by currency experts at the independent institute ENAG, it is 108 percent.
That’s why many Turks want to invest in tangible assets, and cars are in high demand there. People prefer to pay in cash, because loans are hard to come by during the economic crisis – and when they are, the lending rate is well above the base rate, which is now 15 percent.
Luxury tax makes new cars more expensive
Cars are expensive in Turkey – much more expensive than in Germany. The government, which always needs money, has also contributed to this: Two years ago, President Recep Tayyip Erdogan introduced a luxury tax. This also applies to new cars. The amount of this so-called ÖTV depends on the displacement of the engine and can be up to 50 percent of the purchase price. Large cars in particular from abroad are becoming significantly more expensive as a result.
TAYSAD manager Kanca sees golden times for car manufacturers. People want to buy, so manufacturers can keep pushing prices up, he says ARD-Interview.
Overheated used car market
But not only new cars are popular. Turks have long been buying cars of all kinds – at almost any price – and then reselling them for a big profit, often at significantly higher prices. The car becomes an investment and speculation object. The price spiral keeps turning upwards.
The market has overheated so much that a law has now even been passed against it. It prohibits used cars from being more expensive than new cars. Anyone who violates this must fear a fine of up to 300,000 lira – the equivalent of around 10,000 euros. All of this has been in effect since July 15.