Turkish car sales poised to slow as imports become pricier

ISTANBUL - Reuters

REUTERS photo

Turkey’s rapidly growing automotive market is likely to see a slowdown in the remaining months of the year, as the local currency’s tumble against the euro saps demand and hits balance sheets, an industry expert said.

The lira has lost about 18 percent of its value against the euro this year - and 27 percent against the dollar - amid rising concerns about political stability after Turkey failed to form a government after a June vote.

Expectations the U.S. Federal Reserve will lift interest rates this year has undermined demand for riskier emerging-market assets, which has also driven the lira to record lows.

About 70 percent of cars sold in Turkey are imported.

From Jan. 1 to Aug. 31, sales of cars and light commercial vehicles jumped 47 percent to 598,963, helped by a low base effect from sluggish sales in 2014.

But now the weakening lira will be reflected in prices, slowing sales and higher companies’ costs, said Hayri Erce, general secretary of the Automotive Distributors’ Association.

“The remainder of the year will be tough,” he said. “The market is growing but profits are not rising.”

Market leader Doğuş Otomotiv, which distributes Volkswagen, saw profits shrink in the second quarter from the euro’s gains against the lira.

Doğuş Otomotiv’s second-quarter net profit fell 3 percent to 82.6 million lira, even as sales rose 52 percent to 2.79 billion lira, according to an income statement in June.

Turkey is also among the world’s 20 largest car manufacturers, most of which are for export.