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  • Emerging Markets Equity

    Turkey’s Auto Industry Revs Up

    VanEck
    September 09, 2016
     

    VanEck's Emerging Markets Equity strategy seeks to identify persistent long-term structural growth opportunities. Structural growth can be stock-specific or thematic, and can be driven by a sustainable advantage, which is often company management. Through this bottom-up process, we have identified the Turkish automaker Tofas Turk Otomobil Fabrikasi as a promising opportunity, and representative of Turkey's growing auto industry described below (as of August 31, 2016, the holding represented 0.67% of VanEck Emerging Markets Fund's net assets).

     

    Well known for its rich history, geopolitical significance, and beautiful beaches, Turkey is less known as a major motor vehicle manufacturing hub in Europe. Turkey produces more vehicles than Italy and, at the end of 2015, was the fifth largest automotive manufacturer in Europe ― and was ranked the 15th largest vehicle producer in the world.1  

    The "Devrim" Makes an Inauspicious Start

    Turkey's first foray into automotive manufacturing dates back to the early 1960s, but with an inauspicious start. Following its launch in 1961, production of the Devrim, the country's first domestically developed and manufactured passenger car, never exceeded four prototypes. The vehicle's "birth" (and demise) is encapsulated in an amusing anecdote: Turkey's President Cemal Gürsel drove his first (and only) black Devrim about 100 yards before it ran out of gas.2 The car then passed into history.

    Efforts continued, with Turkey contracting the British manufacturer, Reliant, to design a prototype passenger car for local production.3 The result was the Anadol, the country's first domestically developed and mass-produced passenger car, debuted by Otosan in 1966. Production of the Anadol continued through to the early 1980s, and Otosan manufactured trucks through to 1991.4  

    Turkey's Auto Growth Explodes in the 2000s

    By 2015, Turkey was producing close to 1.4 million vehicles, compared to fewer than 374,000 in 2002.5 Once dependent on assembly-based partnerships6 (when Otosan finally ceased manufacturing its own vehicles in 1991 it proceeded to produce those of American giant Ford), the automotive industry in Turkey now both designs and is involved in the mass production of vehicles.

    Turkey exports approximately 1 million of the vehicles it produces each year, with France, Germany, Italy, Spain, and the U.S. its major export customers. In Europe alone, by the end of 2015, Turkey was the top producer of light commercial vehicles.7  

    Large OEMs (original equipment manufacturers) including Fiat and Ford have publicly listed joint ventures in Turkey (with Tofas and Ford Otosan) and the country is fast becoming a research and development hub with certain models now being designed mostly in Turkey.

    We believe that Turkey's automotive sector should continue to grow in size and prominence.

    Turkey's Annual Motor Vehicle Production
    (1999-2015)

     

     
     

     

    Source: OICA (International Organization of Motor Vehicle Manufacturers).  

    IMPORTANT DISCLOSURE  

    1 Invest in Turkey: Automotive.  

    2 Autoweek: Ottomobiles: The memorable cars of Turkey, part one: November 11, 2011.

    3 Autoweek: Ottomobiles: The memorable cars of Turkey, part one: December 1, 2011.

    4 Ibid.

    5 Invest in Turkey: Automotive.

    6 Ibid.

    7 Ibid.

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