The passenger cars and light commercial vehicles market in Türkiye registered the second-highest November sales figures in history, industry data showed Monday, following a 10-month period of consecutive records.
Despite soaring borrowing costs, experts attribute the sustained demand to concerns over inflation and promotional campaigns.
Some 115,040 passenger cars and light commercial vehicles were sold in November, the Automotive Distributors and Mobility Association (ODMD) said in a statement, marking a 39.8% year-over-year increase.
Cumulatively, sales from January through November broke a record to reach a total of 1.07 million units, a 60.8% year-over-year increase.
The market is left with a month to go to build on the peak. The earlier annual all-time high stood at 984,000 units in 2016.
The rise in sales came despite a sharp rise in the costs of loans for vehicles after six successive months of interest rate hikes by the central bank aimed at cooling demand and stemming inflation.
The aggressive tightening that took the central bank’s key policy rate to 40% from 8.5% came after the new economy administration orchestrated a shift from a yearslong policy of low borrowing costs after the May elections.
Vehicle loan interest rates, which stood at 25% before the elections, have surged to nearly 45% since the end of September. Additionally, due to Banking Regulation and Supervision Agency (BDDK) restrictions, loan usage on most vehicles is limited to less than one-third of the price.
Experts acknowledge that financing challenges have partially dampened demand, but they highlight sales have remained vibrant due to concerns about the sudden depreciation of the Turkish lira, deferred demand, and discounts offered by some brands.
“No one expected the market to remain so dynamic after September. The demand, surpassing industry expectations, is likely to continue in December, possibly with discount campaigns,” said Erol Şahin, general manager of EBS Consulting.
“If this momentum is sustained, not only exceeding the 1 million milestone, but also reaching 1.2 million units annually seems possible,” Şahin said.
Sales, considered a strong barometer for the market, appear poised to exceed the predictions of major manufacturers and distributors. If sales in December match last year’s levels, the year-end total could reach 1.2 million units.
The size, coupled with the resolution of supply chain and vehicle availability issues in the industry, aligns with or exceeds the year-end forecasts revised upward throughout the year by leading automakers and distributors, including Tofaş, Ford Otosan, and Doğuş Otomotiv.
Still, experts anticipate a contraction next year, attributing it to financial tightening.
Although experts and companies did not pinpoint a specific time for the decline, they speculate it could occur after the local elections at the end of March.
Hüsamettin Yalçın, general manager of Cardata, an automotive sector data analytics firm, said the sector is having a very good year despite all the challenges.
“The most significant factors are the overcoming of deferred demand and vehicle availability issues. Additionally, a broad segment still views the car as an investment,” said Yalçın.
“However, we expect a 20%-30% decline in automotive sales from the beginning of the second quarter” of 2024 after the elections, he noted.
Despite an expected contraction in individual demand next year, Yalçın said they forecast an increase in fleet and rental demand, which was stagnant this year due to limited financing.
According to ODMD data, passenger car sales in November increased by 54.4% to 91,424 units, while the light commercial vehicle market saw a 2.3% increase, reaching 23,616 units.
In the January-November period, car sales rose by 66.2% to 840,925 units, and the light commercial vehicle market increased by 43.7% to 233,057 units.
