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BGC Partners: Turkey Auto Sales - February 2019

Turkey light vehicle (LV) sales contracted by 47% y/y in Feb-19, continues to be weak... Although there is a m/m increase, passenger car and LCV sales were equally weak in Feb-19, with the former declining by 47% y/y and the latter by 49% y/y. As a reminder, the Special Consumption Tax and VAT cuts in November and December 2018 were extended until the end of March 2019. We note that auto loan rates averaged 26% in February, lower than the 29% in January but it appears that the slight drop in borrowing costs has not attracted enough demand. January and February are typically slow months, not entirely indicative of the trends for the year. Nevertheless, the data is weak. We currently expect the LV market to contract by 24% y/y to 475k units in 2019E. Official guidance from Tofas and Ford Otosan both indicate an annual contraction of 36-37% but both companies stated that they see upside risk to this initial guidance in the post-4Q18 results commentary. Dogus Otomotiv is the most pessimistic in terms of guidance, forecasting sales to drop to 230k-240k units which suggests over 60% y/y contraction but Dogus Otomotiv also stated that their budget was prepared before the end of 2018 and they would foresee higher sales currently. Domestic sales is relatively a smaller portion of sales for both Tofas and Ford Otosan (at around 20%) while it is very critical for Dogus Otomotiv, the importer and distributor of VW branded vehicles in Turkey. (Automotive Distributors’ Association)