The automotive sector, which suffered a great loss in 2020 due to the pandemic, started 2021 with chip crisis and production disruptions.
Plans for change are still inadequate while the game has been rebuilt due to rapid digitization in the sector. Sustainability has become one of the most important agenda items in the sector, and the importance of cybersecurity has increased more than ever.
The automotive report of the Sectoral Overview series prepared by KPMG Turkey has been published. In addition to assessing the paradigm shift in the automotive sector, the report presents policy recommendations needed to ensure the sector’s sustainable growth and greater contribution to the economy. The chip crisis and ongoing production disruptions are forcing the sector, which closed 2020 with great losses due to the epidemic. The pace of digitalization also suggests that in the near future we will see a very different automotive sector.
Commenting on the report, KPMG Turkey Automotive Industry Leader Hakan Ölekli stated that the sector is trying to adapt to the new era, “We have entered into an irreversible change with the first Covid-19 case seen in China at the beginning of 2020. The ‘automotive game is being rebuilt, paradigms are changing’ approaches that have been put forward for some time are increasingly finding fans, but at the same time it becomes clear that there are no plans for this change.” Ölekli, continued: “The global automotive industry; The lack of chips, rapid rises in raw material prices, a 16 percent contraction in global production, the decommissioning of diesel vehicles with the compression of emissions criteria are trying to exist in a climate of threat and change and reach into the future. Beyond that, the climate crisis and environmental challenges increase pressure and responsibility on the sector. These changes around the world have allowed the industry to enter the age of electric and hybrid motor vehicles at full throttle. These developments will radically transform our existing vehicle-centric system into a more efficient, data-driven, driverless, and customer-oriented ecosystem. The importance of cybersecurity in the sector has increased more than ever.”
The SCT regulation will boost sales
Hakan Ölekli pointed out the following issues:
The SCT base limits that will be valid for passenger car trading were changed with the decision of the President published in the Official Gazette. Accordingly, up to 1600 cm3 cylinder volume, the base limit in the 45 percent SCT slice was increased from 85 thousand TL to 92 thousand TL. The new base limit of motor vehicles that exceeded 85 thousand TL and did not exceed 130 thousand TL and were in the 50 percent SCT limit was increased to between 92 thousand and 150 thousand TL. In passenger cars with engine cylinder volume exceeding 1600 cm3 and not exceeding 2000 cm3, the tax base was increased from 85 thousand – 135 thousand TL to 114 thousand – 170 thousand TL. The 45 percent, 50 percent, and 80 percent SCT slices applied to these vehicles were preserved. The regulation made during this period, when car sales are affected due to the rate increase and interest rates, will reflect very positively on sales.
In hybrid vehicles, the SCT base, which is between 85 thousand and 135 thousand TL, was increased to 114 thousand – 170 thousand TL. We think this arrangement will reflect positively on sales. We also need to say that making similar arrangements for electric vehicles will make a great contribution to the sector locally. Encouraging the consumer to electric mobility is of great importance in the process we are in.
Due to concerns about climate change, rapid population growth, and urbanization, new forms of mobility are critical to support future population centers and economic activities. As the mobility ecosystem develops, its global value is projected to rise to more than $1 trillion by 2030.
The phenomenon of creating value with technology resources and data is increasing day by day. Many organizations carry out an intensive data transfer with their stakeholders while carrying out business processes. Therefore, the security of shared data and the importance of third-party risks become more critical.
Here are some highlights from the report:
The sector closed 2020 with 78 million vehicle sales, a 14 percent decrease from 2019. This decline was felt more deeply in Europe. The European Union (EU) automotive market closed in 2020 with a reduction of over 20 percent.
The Turkish automotive sector completed 2020 with 1,336,000 total productions, 796,000 domestic sales, and 916,000 exports totaling more than USD 26 billion. In 2020, sales increased by 62 percent, while production decreased by 11 percent and exports decreased by 27 percent.
In the first quarter of 2021, the European automotive market experienced one of the rare contractions in its history, at 23 percent. Nearly 1.7 million cars were sold in Europe in the first quarter of the year.
The outlook for Turkey, the 15th country in the world and the fourth country in Europe, in the first quarter of 2021 is positive. The production capacity, which is currently just over 2 million units, will increase significantly with an additional 200,000 units to be commissioned in 2023, which Ford Otosan announced in March.
In the first 7 months of 2021, automotive production increased by 11 percent compared to the same period of the previous year to 705,079 units and car production increased by 2 percent to 449,550 units.
The local market is on the rise
Total automotive exports in 2020 are 930 thousand. As the main and sub-industry, $26 billion worth of exports were realized in 2020. In the first quarter of 2021, 265,000 vehicles were exported, resulting in revenue of USD 7.8 billion. The sector’s export forecast for the end of 2021 is USD 30 billion.
The local car market continues to rise. The domestic market grew by 58 percent in the first quarter of the year, to more than 206,000 units. This represents 60.6 percent growth compared to the same period last year. The year-end expectation is in the range of 750-800 thousand.
As of March 2021, revenues from the automotive have risen to their highest level in history. In March, the automotive market grew 93 percent month-on-month. During the same period, SCT collection increased by 242 percent to more than TL 8 billion. SCT obtained in the first quarter of 2021 increased by 97 percent and reached TL 15.1 billion.
Employment continues to rise
The volume of direct and indirect employment in the Turkish automotive sector is 50,000. When dealerships and peripheral units are activated in addition to manufacturing, this number exceeds 500 thousand. TOGG, a domestic car initiative, continues with 375 personnel. The total employment is expected to reach 6,500 people after the factory, which is already under construction, is operational.
Ford Otosan has created an additional 6,500 jobs with its new electric vehicle factory. The agency employs 1,700 new employees due to the epidemic and continues to grow in this area. In addition, it is known that Toyota has asked İŞKUR for an additional 2,500 jobs for its Adapazarı factory.
Chip crisis expands to 2023
The most important problem of the sector in the short term is semiconductor production, namely the chip crisis. The main causes of the chip crisis are the pandemic and the resulting increase in demand for home working and distance education. On the other hand, the rapid recovery of the automotive sector, which was expected to contract, caused an increase in demand that was difficult to meet.
Another important point is the water consumption required by chip production. Taiwan Semiconductor Manufacturing Company (TSMC), the largest manufacturer in the world, announced that it has regained full capacity to meet demand across all industries. However, the drought in the island country of Taiwan makes it difficult to meet the demand. TSMC shared that it needs 156 thousand tons of water daily. In this case, the view that the chip crisis will return to normal in 2022 is gradually expanding to 2023. It highlights the expectation that if the water stocking problem cannot be solved in the face of global warming, the problem will be repeated in the coming years.
The next generation of vehicles is rising
Due to covid-19 restrictions, global car sales fell sharply, down 15 percent from the previous year, according to estimates by the International Energy Agency (IEA). Despite this, electric car sales caught the trend and exceeded market expectations. In the first quarter of 2021, global electric vehicle sales reached about 500,000 units in China and 450,000 units in Europe. This trend was followed in commercial areas such as buses and trucks, as well as passenger vehicles.
Thanks to current policy support and additional incentives, the IEA estimates that sales of electric cars have surpassed 3 million vehicles globally, reaching a market share of over 4 percent. This equates to more than 40 percent growth over the 2.1 million electric cars sold globally in 2019.
The global electric car park increased from 7.2 million to more than 10 million, while several registered vehicles increased by 41 percent. The global electric passenger car park will reach 125 million by 2030, according to IEA estimates. This volume increase is 17.5 percent in sales; 7.5 percent in stock.
TOGG will bring radical change
The mobility ecosystem in Turkey will also change radically. Ecosystem to be built around electric connected next-generation cars developed by TOGG; it will include several new services, from charging infrastructure to location-based apps, connectivity with other smart devices to smart parking apps, membership-based transportation services, and wireless updating of the car’s software.
The lithium-ion battery manufacturing plant, which was founded by Aspilsan last year, is another step to support the production of electrified vehicles in Turkey. This investment is of great importance in the electric vehicle market, locally and globally.