Foreign exchange risks, fierce competition, high taxes and the fact that many businesses are undercapitalised pose downside risks for the industry.
- Automotive demand in Turkey has started to decrease, as the market contracted 3% year-on-year in the first quarter of 2016. This was mainly due to a more difficult political and economic environment coupled with security issues, all negatively impacting domestic demand.
- It is expected that automotive demand will remain at lower levels in the second half of 2016 and into 2017. All segments (automotive manufacturers, suppliers and car part producers, car dealers) are affected by lower sales.
- Despite a favourable raw material costs environment (low flat steel prices), profitability of Turkish car producers and suppliers remained unchanged over the last 12 months. Price wars are common in the market, and with lower raw material prices, companies feel more comfortable in cutting prices to try to increase market share. Competition plays an important role in the direction of stable bottom-line figures. Businesses´ margins are expected to remain largely unchanged in 2016.
- Gearing and financial requirements are average in the Turkish automotive sector. Supplier support, rather than bank finance, is usually sought out in this sector. However, when needed heavy investments are to be funded by bank loans.
- Payment duration in the automotive sector ranges between 30 and 60 days. Payment behaviour is generally stable, with non-payment notifications expected not to increase in the coming months. Automotive insolvencies are low and are expected to remain stable in the coming six months. That said, foreign exchange risks, fierce competition, high taxes and the fact that many businesses are undercapitalised pose downside risks.
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Market Monitor Automotive October 2016
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