1. EMERGING AUTOMOTIVE
B2B MARKET
TURKEY
Written By: Coskun UNCULU
Title: Vice General Manager/Commercial – ERMETAL Automotive A.S.
Date: 03.09.2007

2. 1. Market Production Evolution
After two severe economic crises in 1994 and 2001, Turkish Automotive Manufacturers
and their global partners retained their confidence to Turkish Economy with increasing
production volumes trusting government stand still low inflation economy and strict EU
laws compliance policies.
Production Evolution
1.800
1.600
1.400
1.200
Units
1.000
800
600
400
200
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Years
Passenger Car LCV Truck Bus Tractor
Production volumes increased over 4 times since 2001 and will be 1.640.000 units by
2010 with the contracted new projects.
As seen below, production is heavily on Passenger Cars and LCV segment by Oyak
Renault, Fiat – Tofas, Ford Otosan and Toyota Turkey of which are the major 4 players
with their over 70 % market share.
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3. Major OEMs Volum es
1.200
x 1.000
1.000
800
Units
600
400
200
0
2008 2009 2010 2011 2012
Years
FORD OTOSAN OYAK RENAULT TOYOTA TMMT FIAT TOFAS
It is also expected that Honda and Hyundai will surge their market share with new
investments and production increase in the near future.
2. Market Pros and Cons
Pros
• Investments of OEMs secure over 1.500.000 units per year production beyond
2015 of which enables feasibility to invest,
• EU Customs compliance and free trading zones near to OEMs,
• Geographical place of Turkey (laying on two continents Eurasia country)
• Efficient and competitive logistics in supply chain,
• Local raw material suppliers such as; Ereğli Demir Çelik, Borçelik…etc
• Economical Stability depending on Global Market Trends,
• Trained and educated bilingual young labour force,
• Low Production Cost (1/3 ratio with respect to Spain)
• Flexible working hours up to 60 hours per week (official 45 h/week),
• Vast demand in local co-design product suppliers,
• Existence of Tier 2 suppliers,
Cons
• Budgeting and accounting difficulty due to material procurement in
Euro/Dollar while selling the product in YTL with monthly contracted prices,
• High Greenfield cost at Trade Zones,
• High building cost,
• High electricity unit rate,
• High tax rates,
• Highly competitive market at commodity product suppliers,
• Increasing cost of labour over inflation due to lack in labour force pool for
demand,
• Not enough government or local municipal support to the investors
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4. 3. Market Sales Volume
As B2B market increases, local Tier 1 suppliers’ revenues and sales increase accordingly
within 5 years.
As in the case of sheet metal stamping suppliers’ 2006 overall sales increase 4 times, of
which is over than market increase, than 2001.
It is for sure that by 2010 sheet metal stamping market will be over 500 Million Euros and
sheet metal consumption is expected to reach 2 Million Tons per year.
As a whole market value, it is predicted that 5 Billion Euro transaction will be between
OEMs and Tier1 suppliers.
4. Inside View of Local Suppliers
Most of the suppliers are 100 % private owned and are managed by owners and their
relatives. The vastly used organization structure is U – shape and growing in scale
with increasing sales. As usual for all developing countries, commodity suppliers are
imitators that have same production technologies that drive the market to the “perfect
competitive” environment. If we look at from the 4 Pillars:
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5. Financial
• Most of them are using traditional costing that could not be able to monitor
real time cost of which causes “blind fly” management decisions,
• Deficiency in liquidity ratio and high loan ratio with respect to revenue,
• Deficiency in capital investment for increasing demand,
• No efficient budgeting or no even a clue for most of the companies,
Marketing & Sales
• Most of the companies even do not have marketing and sales department in
their organization,
• Only a few companies supplying parts to 4 major OEMs, most of them
dedicate themselves to an one single customer,
• Neither customer nor model sales risk analyses are done,
• No 3 or 5 years Strategic Sales Plans are done,
Capacity Management & Supply Chain
• Can not calculate their finite capacity constraints,
• Capacity increase driven by sales,
• Hold excessive stock value,
• Production relies on low cost labour,
• Low productivity with respect to developed countries’ competitors. ( ½
productivity than a Spanish Supplier)
Organization
• Old fashioned company organization (U-Shape late 1960s still existing),
• No efficient internal departments communication and team work,
• Low internal customer satisfaction ratio,
• High labour turnover rate,
• Lack motivation,
Local suppliers are clearly evident that can not support further market growth without change
management at all fields in order to survive.
It is also a fact that if they can not turn their sales and capacity increases into the profit, they
will not be able to sustain their existence.
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6. 5. Future Supplier Base Expectation
If there would not be a miracle, that shifting from free to close market conditions, demand
increase over than supply will be the ones distinction and born for others according to
Darwin Evolution Theory in Turkey.
So far foreign investors’ basic strategy was to establish JV or have small scale production
unit investment of which got be change from now on.
While whoever foreigners or natives the future of the Turkish B2B market commanders
will be the ones having up to date technologies production monitored by professional
management.
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