The Turkish automotive industry is heading for a slump, with output set to fall by 35% in 2009. However, the country remains attractive to industry majors, and extra production capacity is planned. This should ensure a return to growth from 2010. In the first two months of 2009, the Automotive Manufacturers Association (OSD) reported that automotive production was down 63% y-o-y, as exports dropped 61.6% y-o-y. It has warned that even at this low level of output, stocks will not be fully depleted until August. BMI forecasts a 35% fall in output to 745,275 units in 2009. Commercial vehicle production will be the worst affected, with output down 43% to 298,110 units, while passenger car production is forecast to fall by 28% to 447,165 units. Falling output comes at a time when carmakers are in the middle of investing in capacity expansion in Turkey. BMI expects these investments to be put on hold until the market recovers, but will they not be abandoned - as the Turkish industry will remain a strategically important and cost-effective base for supplying the EU. We foresee a diversification of export destinations, with producers set to take more advantage of growth in nearby emerging markets. Majors are more likely to resume output in Turkey than their West European plants, where production costs are higher and the markets will remain depressed. A revival is likely in 2010 when we anticipate production growth of around 8%, strengthening to 35% in 2011. By 2013, production should reach 1.28mn units, an increase of 11% on the record peak that was seen in 2008. The domestic market will also be depressed with automotive sales down by 13.5% to just under 501,500 units, adding further woes to the sector and marking a third successive year of decline. The commercial vehicle market will be markedly affected by a decline in fixed capital formation and a slowdown in haulage, with sales set to drop 14.5%. However, 2009 is likely to be the market's nadir, with a recovery expected from 2010 - when sales are set to rebound by 10.7% to reach near 2008 levels. By 2013, Turkey should see its highest annual sales volume, beating the previous record set in 2006 with sales exceeding 714,000. Despite the downturn, automakers still regard Turkey as a strategically important production base, and are planning for the future. A joint venture (JV) between Renault Trucks and Turkey's Karsan is one of several projects to be undertaken by the industry in 2009. Tofas, the JV between Italian carmaker Fiat and Turkey's Koc Holding, will continue with its EUR290mn (US$365mn) investment plan in 2009. The project involves research and development (R&D) and production costs for the new LCV model, which was scheduled to go on sale in H209.
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