Chinese automotive giant BYD has officially announced its $1 billion investment in Turkey... Thus, after many years, Turkey has received a direct foreign investment in the automotive sector. Expectations are high that we will continue to hear similar investment news. How should BYD's investment be interpreted, what does the future hold, and most importantly, how will this development affect the domestic market? Details are in our news...
In recent times, wherever we turn in traffic, we inevitably come across a model from a Chinese automotive company. And this situation is not just valid in Turkey. Similar scenes are happening all over the world. China is becoming one of the most important players in the automotive world, entering it very aggressively.
In such an environment, the signing of official agreements regarding the investment of BYD, one of China's largest automotive brands, in Turkey is noteworthy.
Under the agreement, an electric and rechargeable hybrid car production facility with an annual capacity of 150,000 vehicles will be established with an investment of approximately $1 billion. Additionally, it is envisaged to set up an R&D center for mobility technologies. All these are recorded as the first foreign investment in the automotive sector in Turkey after 27 years.
Why is BYD establishing a factory in Turkey?
The answer to this question is critical to better understand both today and the near future. Although it is news in the automotive world, it is actually a process directly related to other areas as well.
We will get to the automotive part, but first, it is essential to touch upon the global trade part. Currently, the road to Europe via Russia is closed due to the Ukraine war. Access to Europe by sea is also in serious trouble due to the destruction in Gaza by Israel and the Houthi response in the Red Sea. These are the global trade aspects of the situation.
On the other side, there is the automotive industry. The investment of a Chinese company in Turkey has the potential to directly affect the domestic market, Europe, and bilateral trades.
"A giant supply chain and very advanced infrastructure are also present"
To see the bigger picture, we met with Hakan Doğu, a well-known name in the automotive sector. Doğu is also the President of the Sustainable Mobility Initiative (SMI).
He starts by recalling China's very good strategy since the 2010s, especially in electric vehicles.
"Behind the production volumes of up to 30 million, which no country has ever achieved, there is not only technology but also a giant supply chain and infrastructure," says Hakan Doğu. Naturally, he emphasizes that China is far ahead of other countries in this area and that it is not possible to close this gap in the short term.
Additional taxes imposed on Chinese companies
Hakan Doğu believes that Western companies and Turkey were caught unprepared for this rapidly changing market. He recalls that many countries, including Turkey and primarily the US, have started to impose additional taxes, new regulations, and anti-dumping temporary taxes to combat this situation. "In this regard, Western countries and Turkey were not wrong," he summarizes the process.
Doğu points out that these additional measures, while implemented to protect each country's domestic industry, also aim to force Chinese companies to invest.
He explains that the Beijing administration has seen this reality and has announced investment decisions in countries like Mexico, Hungary, Spain, Morocco, and South Korea to overcome the measures. Here, the primary goal is summarized as "maintaining market access to both the EU and the US."
"Turkey rightly protected its domestic market"
At this point, Hakan Doğu makes an aside and states that countries like Morocco, South Korea, and Mexico have free trade agreements with the US. Chinese companies can export to the US from these markets. "Similarly, Turkey is a very suitable country for exporting to the EU," he says.
However, he notes that Turkey was disappointed when Chinese companies made their initial investments in countries like Hungary, Spain, and Morocco, and "Initially, regulations and additional taxes that made imports difficult created challenges for Chinese companies. Turkey was very right here, and with this decision, our domestic market was protected. Furthermore, considering that the trade imbalance between China and Turkey has exceeded $40 billion, it is clearer to see that Ankara made the right move," he says.
President Erdoğan and Minister Fidan's contacts
At this point, Hakan Doğu shares the information that the number of countries negotiating direct investment in Turkey has fallen to four and states:
"And finally, the decision of the world's largest electric vehicle manufacturer, BYD, came. At the same time, the opportunity to import tax-free vehicles was offered to 3-4 companies that had received investment incentive certificates for a while longer.
There was a deadlock in the negotiations that lasted about 9-10 months. Most recently, after Foreign Minister Hakan Fidan's visit to China, this situation became clearer. Immediately after this visit, new taxes were imposed on all cars coming from China.
Since automotive investments are large and strategic investments, intergovernmental relations are very important in these matters. A few days ago, after President Erdoğan's meeting with the Chinese President, the announcement of BYD's investment decision also showed the agreement. In the future, other investments may come to Turkey."
How will BYD's investment affect brands in Turkey?
BYD is investing in countries like the US, Mexico, Thailand, Hungary, and Uzbekistan simultaneously. In this context, the question arises, "How will they plan their investment in Turkey in terms of both financial and human resources?"
Hakan Doğu draws attention to the fact that it's not just about money... "Even if you put the money on the table, you may not be able to realize your investments due to a shortage of human resources. In this context, I think they will probably spend the money over time," he says.
Doğu completes his words by answering our question on how BYD's investment will affect the domestic market in Turkey:
"BYD is a very different company from other manufacturers... It produces almost everything itself and doesn't buy much from outside. Therefore, I don't expect it to create much added value. Similarly, since competing with China is not possible, the issue of localization in Turkey doesn't seem very easy either.
BYD is not only the largest in China. It is also the largest electric vehicle manufacturer in the world, along with Tesla. Therefore, this investment could be a positive motivation for other Chinese brands.
However, other local brands in Turkey will be negatively affected by this. Providing very advantageous conditions to a new brand coming from outside is a problem for them. With these advantageous conditions, it is very likely that BYD will become one of the most important players in the electric vehicle and hybrid market in the short term. This means market loss for established manufacturers.
So, what could be the solution? To protect the existing industrial infrastructure, the government should grow the domestic market towards two million units and use this market size both to protect the existing industry and to convince everyone to invest more."
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