i

Growth of Turkish Automotive Industry between 2000–2010Term Project Final

Middle East Technical University

ECON105 Introduction to Research Methods IAssignment: Term Project FinalDate: 6.1.2011Instructor: Dr. Osman GülsevenStudents: Çiğdem Ayşenur Şafak (1539469)

Emel Yavuz (1539287)

Abstract

In this study, the growth of the automotive industry in Turkey between 2000 and 2009 will

be examined in a general view. The improvement of the sector and other important things

related to the Turkish automotive sector such as development of the European automotive

industry or the development of other major areas automotive industries between 2000 and

2009 will be examined. Our main purpose is to see whether the global and local economic

crises have affected automotive sectors like all sectors, and whether the Turkish automotive

sector has become an essential part of the global production. We present results from

quantitative analyses on data from a variety of sources, which basically confirm most of our

hypotheses in this direction.

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Abbreviations

Terms

GDP: Gross Domestic Product

USD: United States Dollars

TRY: Turkish Lira

Organizations

OSD: Automotive Manufacturers Association (Otomotiv Sanayi Derneği)

OICA: International Organization of Motor Vehicle Manufacturers

ACEA: European Automobile Manufacturers Association

CLEPA: European Association of Automotive Suppliers

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Contents

Abstract.............................................................................................................................. ii

Abbreviations..................................................................................................................... iii

Contents............................................................................................................................ iv

List of figures......................................................................................................................v

1. Introduction..................................................................................................................1

1.1. Problem description and importance of study.......................................................1

1.2. Organization of the paper.....................................................................................1

2. Literature review..........................................................................................................2

3. Data..............................................................................................................................4

4. General developments in Turkish automotive industry.................................................5

4.1. Global market, Europe, and Turkey.......................................................................5

4.2. Exports to global market.......................................................................................8

5. Main factors affecting development.............................................................................9

5.1. Financial crises......................................................................................................9

5.1.1. 2001 local financial crisis...............................................................................9

5.1.2. 2008 global crisis.........................................................................................10

5.2. Exchange value of the Turkish lira......................................................................11

6. Conclusions................................................................................................................12

7. References.................................................................................................................14

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List of figures

Figure 2.1 Car ownership and GDP per capita. From Haugh, Mourougane and Chatal (2010).

............................................................................................................................................... 2

Figure 3.1 World automotive production (car and commercial vehicles) statistics for 2009.

(Haugh, Mourougane and Chatal 2010)..................................................................................4

Figure 4.1 World motor vehicle production by region between 2000 – 2009. Source: (OICA

2010).....................................................................................................................................6

Figure 4.2 Vehicle Production in Europe by Country in 2009. Source: (OICA 2010)................7

Figure 4.3 Percentage Growth of Production in Turkey and Europe between 1998 – 2009.

Source: (OICA 2010)...............................................................................................................8

Figure 4.4 Total Automotive Export and Import of Turkey between 2000 – 2009. Source:

(OSD 2010)............................................................................................................................8

Figure 5.1 Growth of Turkish Automotive Industry and GDP between 1998 – 2009. Source:

(IMF 2010)..............................................................................................................................9

Figure 5.2 Comparison of the GDP and automotive production of Turkey for the period 1999

– 2010. Sources: (IMF 2010, OSD 2010)...............................................................................10

Figure 5.3 Percentage of World Motor Vehicle Production by Region in 2008. Source: (OICA

2010)....................................................................................................................................11

Figure 5.4 Percentage of World Motor Vehicle Production by Region in 2009. Source: (OICA

2010)....................................................................................................................................11

Figure 5.5 Growth of Export and Automotive Production in Turkey with Respect to Change of

TRY/USD. Sources: (TURKSTAT 2009, OANDA 2010, OICA 2010)..........................................12

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1.Introduction

1.1. Problem description and importance of study

In this research, we will look at the development of the Turkish automotive industry in

general, how and when it has started to improve, and what factors have affected its

improving. The selected subject is very extensive, so we will limit our research with the

last ten years. This selected time period is also interesting because it covers two very

significant financial events, namely the 2001 financial crisis in Turkey and the 2008

global financial crisis.

Automotive industry, i.e. the design, manufacturing, and marketing of the motor

vehicles, comes first in the economies of the developed countries. Also the automotive

industry leads the technological improvement of countries in general and is closely

related to many other sectors including raw material industries such as iron, steel, and

gum. Because of being such an important sector and having a large share in the

production and trade, Turkish automotive industry is chosen as an interesting research

subject.

The state of the industry in Turkey will be our main concern and we will concentrate on

quantitative data from various sources and we intend to reach some interesting

inferences after evaluating our data. Our research will have the following two

hypotheses: that the global economic crisis has affected the automotive sector but there

is still an export surplus; and that the Turkish automotive sector has become an integral

part of the global network of production bases.

1.2. Organization of the paper

We will start by providing a review of existing research on the subject in Section 2. A

brief overview of the sources of quantitative data that we use in the research is given in

Section 3. We present our main research results about the general developments in the

Turkish automotive industry in Section 4 and about the main factors affecting the

development of the industry in Section 5. The paper closes with our conclusions in

Section 6.

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2.Literature review

Firstly, looking at the subject in a general view, because of the size and importance of the

automotive industry, research literature involving the history, development, and current

status of the industry, such as general references on the main trends are widely available.

Sources like Chiu (2008), for example, give an overview of the evolution of the car together

with the production industry and consumer market. Plunkett (2010), gives information

about the current trends in the industry, results of market research, and data about the

leading companies. Reports such as Haugh, Mourougane and Chatal (2010) shows the

relation between the development level of economies and the state of car consumption (see

Figure 2.1 for an example). These studies also give valuable information about the position

of Turkey within the world, both as a consumer and as a producer of cars.

Figure 2.1 Car ownership and GDP per capita. From Haugh, Mourougane and Chatal (2010).

If we consider the 2008 global financial crisis and its effect on the global market, a very

remarkable review of the automotive industry in the developed countries is given by several

OECD (Organization for the Economic Cooperation and Development) working papers.

Haugh, Mourougane and Chatal (2010), for instance, give detailed information about the

state of the industry, including the reasons for the collapse in car sales at the beginning of

the crisis, policy measures, and effects of the global crisis. They also give medium and long

term projections about industry performance and sales. Statistical data, which are

especially useful for our study, are widely available, such as data on world motor production

by countries and vehicle types (OICA 2009) and local production capacities and financial

aspects (OSD 2010), allowing us to use quantitative methods to see exactly what has

happened from the past to the present. The most important organizations that publish

statistics about the automotive industry globally and in Turkey are as follows:

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OSD – Automotive Manufacturers Association (OSD 2010)

OICA – International Organization of Motor Vehicle Manufacturers (OICA 2009)

ACEA – European Automobile Manufacturers Association (ACEA 2010)

CLEPA – European Association of Automotive Suppliers

Studies like Wells (2010), on a different topic, give information about the environmental

aspects of the global growth in automotive industry.

For research literature about the general trends in the automotive industry in Turkey,

especially for the last ten years, there are published surveys measuring the development

and performance of the industry, such as export statistics (Bedir 2002, OSD 2010). Data

such as these are useful for searching for correlations within the factors affecting the

development in a quantitative way. There are also several studies analyzing domestic sales

figures, a very important factor in the revenues of Turkish automotive manufacturers (Bedir

2002, OSD 2010). Additionally, the subject is covered in thesis works, which mostly give

information about the industry in a local perspective, and sector analysis reports from

Turkish organizations (Şah 2007).

Another important theme for research is the effect of the recent financial crises (both the

2001 financial crisis in Turkey and the global crisis of 2008) on the automotive industry. In

a World Bank working paper on the subject, Van Biesebroeck and Sturgeon (2010), for

instance, give information about the impact of the crisis in leading production countries or

regions, trends leading to the crisis, and different development strategies after the crisis.

Research covering the effects of 2008 global crisis on the Turkish automotive sector are

also available in the two thesis works mentioned before (Toydemir 2008, Sarıboğa 2008),

allowing one to look at the change of rate in exports and imports with the crisis.

Published statistical data about motor vehicle taxes, such as the data by the Revenue

Administration of Turkey (2010), can also be considered an important part of existing

literature, because we will interpret these for understanding how taxes affect production

and consumption in the sector.

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3.Data

In this study, the main data relates to the growth of the automotive industry in Turkey

between 2000 and 2009. The improvement of the sector and other important things related

to the sector such as development of the European automotive industry or the development

of other major areas automotive industries between 2000 and 2009 should also be

quantitatively examined. We use graphs and charts to create a better look and to explain

the data in a proper way.

For data about Turkey, our base sources will be statistics published by major organizations

(OICA 2009, OICA 2010, IMF 2010, OSD 2010), working papers by OECD (Haugh,

Mourougane and Chatal 2010), master theses (Sarıboğa 2008, Toydemir 2008) and sector

analysis reports from Turkish organizations (Şah 2007). Some organizations that publish

statistics about the automotive industry in Turkey and in the world that we will use in our

research:

1. OSD – Automotive Manufacturers Association (Otomotiv Sanayi Derneği)

2. OICA – International Organization of Motor Vehicle Manufacturers

3. ACEA – European Automobile Manufacturers Association

4. CLEPA – European Association of Automotive Suppliers

Figure 3.2 World automotive production (car and commercial vehicles) statistics for 2009.

(Haugh, Mourougane and Chatal 2010).

4

4.General developments in Turkish automotive

industry

In this section, we will look at the automotive industry in a general view. How has this

sector developed? What keeps the development going? Besides, we will examine the

general trends in the last ten years for the automotive industry in the whole world and

specifically in Turkey.

A view of the automotive production of Turkey in a global and European perspective, and a

comparison of these all are given in Section 4.1; and the following sections of 4.2 and 4.3

relate to the exports and the domestic consumption of Turkey.

4.1. Global market, Europe, and Turkey

Because Turkey has a considerably low contribution to the total automotive production

of the world and it is so hard to see and visualize this little effect, and to put things into

the larger perspective, we start by the total production numbers of main regions of the

World (Africa, America, Europe, and Asia-Oceania) between 2000 and 2009 (Figure 4.3),

and then continue to the share of Turkey within the European production figures. Turkey

is an integral part of Europe and also has a considerable share in total production

(Figure 4.4) (OICA 2010).

Africa has a very small share in production of the automotive compared with the other

major areas. South Africa and Egypt have the most of production in whole Africa.

America has been a major manufacturer in automotive production. NAFTA members

(Canada, Mexico, and United States of America) have a very big share in the total

production of the America. Countries in South America however are not very effective in

the production. From 2000 and 2007 there is not a big production change, there are

some little decreases and increases. But after 2007 production starts to decrease and in

2009 production decreased to a level which hasn’t been reached for many years.

Because of the global crisis automotive industries like many other industries face a

recession.

Production of Europe, like America, is not very fluctuant between the 2000 and 2007.

Increases and decreases are not very remarkable. However after 2007, again like

America, automotive production of Europe starts to decrease rapidly. In 2009 production

is at a very low level because of the global crisis. Germany, France and Spain have the

most part of production in Europe.

After 2002 Asia shows a very significant improvement. Production is getting better and

better year after year. Even during the global crisis production of Asia does not

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decrease, actually it increases. Because of some reasons, for example, the increasing

demand for low cost vehicles in some countries such as China and India; and

expectations about potential markets such as Thailand and Malaysia, automotive

production has increased rapidly in that region (RNCOS 2007). China, Japan and the

South Korea are taking the lead of automotive production in recent years.

Figure 4.3 World motor vehicle production by region between 2000 – 2009. Source: (OICA

2010).

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Figure 4.4 Vehicle Production in Europe by Country in 2009. Source: (OICA 2010).

We continue by comparing the production of growth in automotive industries in Turkey

and Europe by percentage (Figure 4.5). Between 2000 and 2001, Turkey has a very

rapid decrease; we can obviously see the crisis of 2001 just affected Turkey. Europe

generally has very little fluctuation until 2007. The global crisis affected whole Europe

including Turkey. Also we can see that other counties were affected in 2007 but Turkey

was affected about one year after that (OICA 2010).

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Figure 4.5 Percentage Growth of Production in Turkey and Europe between 1998 –

2009. Source: (OICA 2010).

4.2. Exports to global market

We will measure the development and performance of the industry mainly by export

statistics (Bedir 2002, OSD 2010) and correlate this data with the factors affecting the

development in a quantitative way.

Figure 4.6 Total Automotive Export and Import of Turkey between 2000 – 2009. Source:

(OSD 2010).

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5.Main factors affecting development

5.1. Financial crises

Another sub problem we cover are the effects of 2008 global crisis on the Turkish

automotive sector. We first look at the change of rate of exports and imports with the

crisis. To begin with, we will consider the 2001 Turkey financial crisis (Toydemir 2008,

Sarıboğa 2008, Van Biesebroeck and Sturgeon 2010) in Section 5.1.1 and the 2008

global financial crisis (Haugh, Mourougane and Chatal 2010) in Section 5.1.2.

5.1.1. 2001 local financial crisis

Comparing the changes in total GDP and production of automotive industry (Figure

5.7), and their actual values (Figure 5.7), help us to see the effect of this sector and

what its yield is in total. We can also see here the effects of the 2001 local crisis and

the later global crisis. Both GDP and production decreases in these years. We

calculated the correlation coefficient to quantitatively see the relation between these

two concepts. The result, 0.83830, is very close to +1, so this means that GDP and

production are positively related to each other. When one of them starts to increase

the other also increases and vice versa (IMF 2010).

Figure 5.7 Growth of Turkish Automotive Industry and GDP between 1998 – 2009.

Source: (IMF 2010).

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Figure 5.8 Comparison of the GDP and automotive production of Turkey for the period

1999 – 2010. Sources: (IMF 2010, OSD 2010).

5.1.2. 2008 global crisis

If we plot the two pie charts in Figure 5.9 and Figure 5.10 to display the whole

market production and the percentage of regions’ production in 2008 and 2009, the

effects of the global crisis can be seen easily by looking of these: in 2008 America

has a 24% share and Europe has a 31% share of the total world production but the

next year they both lose their production share; while Asia-Oceania increases its

production percentage. We can also see which region is much more effective in the

production by looking at the charts, and it is of course in both two years Asia-

Oceania (OICA 2010).

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Figure 5.9 Percentage of World Motor Vehicle Production by Region in 2008.

Source: (OICA 2010).

Figure 5.10 Percentage of World Motor Vehicle Production by Region in 2009.

Source: (OICA 2010).

5.2. Exchange value of the Turkish lira

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Another particularly important factor affecting any sector which exports its manufacture,

and more than so especially for the automotive industry, is the exchange value of the

Turkish lira against other currencies. Here we quantitatively examine the value of the

Turkish lira in terms of US Dollars during the selected time period and to reach

inferences about any correlations in our data.

We plot the relationship between these three concepts which are change of TRY/USD

(the value of 1 Turkish Lira in terms of US Dollar), the change of total export, and the

change of automotive production (Figure 5.11). The correlation coefficient that we

compute between total export and automotive production is 0.94362 and the fact that

this is so close to +1 is an expected result, which means that the automotive production

has a very important effect on and follows the general trends in the total exports of

Turkey.

The other correlation coefficients that we compute are between the exchange value of

the Turkish Lira (against US Dollar) and the total exports; and the exchange value of the

Turkish Lira and the automotive production in Turkey, which are -0.44509 and -042427

respectively. These correlation coefficients give us the result that both the total exports

and the automotive production are slightly inversely related to the international value of

Turkish Lira, which means that generally a low value of the Turkish Lira is favorable to

the exporting industries (OICA 2010, TURKSTAT 2009, OANDA 2010).

Figure 5.11 Growth of Export and Automotive Production in Turkey with Respect to

Change of TRY/USD. Sources: (TURKSTAT 2009, OANDA 2010, OICA 2010).

6.Conclusions

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In this study we saw how Turkish automotive industry is significant in Europe and all over

the world; export and import values gave remarkable results to evaluate our main problem.

At the beginning of this paper, it was assumed that global and local economic crises have

affected automotive sectors like all sectors but there is still an export surplus in the sector

under study and the second thing assumed is that Turkish automotive sector has become

an integral part of the global network of production bases. We believe that quantitative

analyses on data from a variety of sources have confirmed most of our hypotheses in this

direction.

There are some parts that this research does not cover, especially the history of the

development of this very extensive industry beyond the selected time period of the nearest

decade; and the engineering part of industry. We suggest the future researchers to inspect

these areas.

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7.References

ACEA. "Statistics." European Automobile Manufacturers' Association. 2010.

http://www.acea.be/index.php/collection/statistics (accessed November 10, 2010).

Bedir, Atilla. "Türkiye'de Otomotiv Sanayii Gelişme Perspektifi." Vol. DPT:2660. Republic of

Turkey Prime Ministry State Planning Organization, November 2002.

Chiu, Imes. The Evolution from Horse to Automobile: A Comparative International Study.

New York: Cambria Press, 2008.

Haugh, David, Annabelle Mourougane, and Olivier Chatal. "The Automobile Industry in and

Beyond the Crisis." OECD Economics Department Working Papers, 2010.

IMF. "World Economic Outlook Database." International Monetary Fund. October 2010.

http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/weoselgr.aspx (accessed

December 8, 2010).

OANDA. "Average Exchange Rates." OANDA Corporation. 2010.

http://www.oanda.com/currency/average (accessed December 8, 2010).

OICA. "OICA 2009 Production Statistics." International Organization of Motor Vehicle

Manufacturers. 2009. http://oica.net/category/production-statistics/ (accessed

November 10, 2010).

—. "Production Statistics." International Organization of Motor Vehicle Manufacturers. 2010.

http://oica.net/category/production-statistics (accessed December 8, 2010).

—. "Production Statistics." International Organization of Motor Vehicle Manufacturers. 2010.

http://oica.net/category/production-statistics (accessed December 8, 2010).

OSD. "General and Statistical Information Bulletin of Automotive Manufacturers 2010 - I."

Automotive Manufacturers Association. 2010. http://www.osd.org.tr/cata2010.pdf

(accessed November 10, 2010).

OSD. Otomotiv Sanayiinde Dış Ticaret (1992-2009). RAPOR 2010/2, Ankara: OSD, 2010.

Plunkett, Jack W. Plunkett's Automobile Industry Almanac 2011: Automobile, Truck and

Specialty Vehicle Industry Market Research, Statistics, Trends & Leading Companies.

Plunkett Research, Ltd., 2010.

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Revenue Administration of Turkey. Tax statistics. 2010. http://www.gib.gov.tr/index.php?

id=271 (accessed November 10, 2010).

RNCOS. "Asian Automotive Industry Outlook (2007-2011)." 2007.

http://www.automotiveuniverse.net/reports/asianautomotiveoutlook.pdf (accessed

December 8, 2010).

Şah, Ömer Faruk. Türkiye Otomotiv Sektörünün İhracat Performans Analizi. Ankara, 2007.

Sarıboğa, Nursel. "Türkiye Otomotiv Sektörünün Gelişimi ve İhracatı Artırma Stratejileri

(Master Thesis)." İstanbul, 2008.

Toydemir, Yelda. "2001 Krizinin Firmaların Mali Yapıları Üzerine Etkisi, Otomotiv Sektörünün

İncelenmesi ve Bir Uygulama (Master Thesis)." İstanbul, 2008.

TURKSTAT. "Foreign Trade Statistics." Turkish Statistical Institute. 2009.

http://www.turkstat.gov.tr/VeriBilgi.do?tb_id=12&ust_id=4 (accessed December 8,

2010).

Van Biesebroeck, Johannes, and Timothy J. Sturgeon. "Effects of the Crisis on the

Automotive Industry in Developing Countries." World Bank Working Papers, 2010.

Wells, Peter. The Automotive Industry in an Era of Eco-austerity: Creating an Industry as if

the Planet Mattered. Northampton: Edward Elgar Pub., 2010.

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