No green field investment in Turkish car sector for 21 years

No green field investment in Turkish car sector for 21 years

Koç Holding started production in the automotive industry in 1959 by cooperating with American Ford. Germany’s Mercedes came in 1967, Italian Fiat in 1968, and French Renault came in 1969 to invest in Turkey.

New investments in the automotive industry started to come after the Customs Union between Turkey and the European Union came into force in 1995. Following Toyota’s investment in 1994, Hyundai and Honda started their production in Turkey in 1997. Everyone thought other brands would follow. But no one came for the past 21 years.

Turkey’s and the automotive industry’s biggest green field investment was made in 2001 by Ford Otosan in Gölcük in the Marmara region in 2001. As of that date, no factory has been built.

Everyone says Turkey is a good candidate for new investments but all sorts of arguments pop up when it comes to making the actual decision to invest. The case involving the French PSA (Peugeot Citroen) is the latest example. PSA decided to construct a plant with a $650 million investment in Morocco, which has no production experience in the automotive industry. PSA executive vice president Jean-Christophe Quemard responsible for Africa-Middle East had said Turkey was the biggest candidate to construct the factory in this region.

“At first we thought of Turkey, which is a very strong automotive base. But due to the rise in prices and political fluctuations in recent years we have taken other options under evaluation,” he said.

GM’s regret

This reminded me of the decision of the American GM, who closed the Opel assembly plant in İzmir in 2000, which then belonged to the brand. GM chose to start producing its new Astra Sedan model in Poland over Turkey in 2005. But they regretted it in a very short time. Rick Wagoner, the then president and CEO of GM had confessed it during the 2008 Detroit fair to the international press.

“We also debated among ourselves why we chose Poland over Turkey, I asked my colleagues about this mistake,” he said during the fair, which I was covering as well. The lack of quality in the cars produced in Poland was behind this regret.

We may hear similar messages of regret from PSA in a few years’ time.

But the real surprise as far as I am concerned was the German BMW’s statement last week that it would make its first European investment to Hungary after 20 years.

BMW announced it would spend approximately 1 billion euros (about $1.2 billion) for the new assembly plant that will be its first factory built from the ground up to manufacture all its next generation electric vehicles. It is being said that BMW may shift the production of next generation X3, X4, X5 and X6 models to the plant in Hungary from the plants in North America, which have been affected by the newly applied additional 25 percent tariff since June.

Just as we were thinking whether “we can come out a winner” from trade wars between the United States and Europe, Hungary got the lion’s share.

In other words, we have missed two big investments in a short period of time.

In the new period ahead, we have to find ways with new incentives to attract after 21 years of giant automotive investments.

Otherwise, the automotive industry has come to the limit of its production. We have no other chance but to bring new brands to Turkey in order to grow.

Emre Özpeynirci, Automotive, Turkish automotive market, Koç Holding, Ford Otosan, BMW, PSA, General Motors