EUR 103.69 For Business Accounts Only

TURKISH AUTOMOTIVE SECTOR

Light vehicle (LV) sales contracted by 43% y/y in Dec-18, by 35% in 2018 (620,937 units in line with sector exp 600k-650k units). In Dec, there was a 39% y/y decline in passenger car sales to 60,843 vehicles, well in line with expectations while LCV sales at 16,863 vehicles was slightly above expectations. As a reminder, the Special Consumption Tax and VAT cuts in November and December 2018 was extended until the end of March 2019. There is a positive impact on sales from the tax cut which results in an up to 10% decline in the retail price of the vehicles as the y/y contraction in monthly sales declined to 42-43% in the last two months of 2018, showing an improvement compared to the c70% y/y decline observed earlier in September and October. The continuation of the tax cuts for another three months in 2019 and the recent communique allowing the leasing of commercial vehicles to some extent are positive for automotive sales in 2019E. However, interest rates still remain high. According to data from the Central Bank of Turkey, auto loan rates climbed to above 32% in September and came down to c28% at the end of 2018. Leasing companies, some of which have filed for bankruptcy protection also are still vulnerable while their share of new passenger car sales was above 20%. We expect LV demand to be in the 450k - 500k range in 2019E (some 20-28% decline y/y) with no official guidance from companies as yet. (Automotive Distributors’ Association, BGC Partners)