Inflation pushes Turkey car sales up by 50%
In the first half of 2021, car sales in Turkey exceeded 310,000 units, up 52.4% over the same period in the previous year. LCV sales were up 67%, to 85,000 units. One of the drivers of the sales boom in the country’s rampant inflation, which is fuelling a rush on big-ticket items. Analysts expect demand for new vehicles to remain high in Turkey for the next few months at least.
It doesn’t quite sound right. Turkey (pictured: bridge over the Bosporus in Istanbul) is struggling with the effects of a worsening economic crisis, yet sales of big-ticket items such as cars and houses are showing a healthy increase.
The latest figures show Turkey’s year-based consumer inflation, which hit 17.5% in June, is likely to go exceed 20%, since producer inflation in many crucial sectors is already well above that figure.
However, there is much speculation that actual inflation is much higher than the official figure. In May, Turkey’s national statistics agency (TUIK) filed an official complaint against the Inflation Research Group (ENAG), because the latter claimed inflation really stood at 36.72%.
One fiscally orthodox way to reduce inflation would be to increase interest rates, to encourage saving instead of consumption. However, the current government has repeatedly expressed an ideological unwillingness to do so.
As a result, many observers (and consumers) expect inflation will continue to rise. To protect wealth, savings are converted into foreign currency, or into durable goods – such as houses and cars.
In June, 135,000 homes were sold in Turkey, more than double the amount sold in the previous month. More than 80% were bought entirely by private means, without having to resort to external financing. Other favourite ways to spend a lot of money: renovations and interior redecoration, and travel.
Of course, this course of action is open only to the relatively small section of Turkish society that is rich enough. According to figures cited by AL-Monitor, 25% of the country’s 83 million people account for 50% of the country’s income; and the top 10% earn 32.5%.
However, the consumer boom fuelled by a relatively small upper segment of society may be a negative rather than a positive, in the bigger picture.
Higher consumption increases Turkey’s reliance on imports, which weakens the position of the Turkish currency. That increases costs for Turkish manufacturers and consumers, and makes it harder to finance the country’s foreign debt.
And a worsening economic crisis will eventually also burst Turkey’s automotive and real estate sales bubbles.