1 mar 24

Despite high inflation, Turkey’s fleet experts are hopeful for the second half of 2024

Turkey is facing one of the worst inflation crises in its history. And yet, passenger cars are selling in record numbers. Turkey’s fleet experts are cautiously hopeful for a gradual recovery of the country’s fleet industry in the second half of the year when inflation should come down, and funding opportunities increase. 

In January, Turkey’s annual inflation rate hit 64,86%, says TurkStat, the country’s statistical office. That’s a new high, replacing the previous peak of 36,08% in December 2021. The price spike has hit some industries harder than others, catering worst of all, with an annual inflation rate of 92.27%.

Second-worst crisis

Still, this is only the second-worst inflation crisis in recent Turkish history. In 1994, inflation reached a staggering 126%. Then as now, Turkey managed to calm the inflationary storm thanks to a highly dynamic consumer market and equally vibrant industrial output, mainly in the automotive sector. 

Since the 1960s, Turkey has become an important production base for several major automotive manufacturers, including Mercedes-Benz, Ford, Fiat, Toyota, Hyundai, Honda, and Renault. Today, most of Ford’s light commercial vehicles (LCVs) delivered across Europe are made in Turkey, as are millions of cars and trucks from other brands. 

The automotive sector has emerged as one of the main drivers of Turkey’s economic recovery. As a result, the inflation rate, which has been increasing steadily since 2021, is predicted to slow down from the second half of this year. The fleet market is eagerly anticipating this development, as it will allow it to start growing again.

Positive driver

Compared to Europe, Turkey has a young demographic, and that is an inherently positive driver for economic growth. At the end of 2023, the country’s population passed the 85-million mark. Also, last year, the passenger car and LCV market surpassed the 1-million mark in sales for the first time. According to ODMD, Turkey’s Automotive Distributors and Mobility Association, year-on-year growth in both segments combined reached 57.4%, resulting in just shy of 1,233,000 units sold. The previous record was set in 2016, with nearly 984,000 units sold.  

Passenger car and LCV sales in Turkey, January-December 2023 (ODMD)

  Unit sales Year-on-year increase
Passenger car  937,342 63,2%
LCV 265,294 39,2%

Top five brands in passenger car and LCV sales in 2023 

Fiat 193,622
Renault 135,645
Ford 102,380
Volkswagen 88,776
Peugeot  78,632


Defying inflation

There were three crucial developments in the Turkish auto market last year:

  1. The entrance of several electric vehicle (EV) brands in the Turkish market, mainly BYD and Tesla, followed by Turkey's first domestic EV brand, TOGG
  2. The showdown of EVs successfully triggered the dynamics of the vast consumer market, displaying its appetite for the internal combustion engine (ICE) and EV luxury models and pushing up the sales of brands including Porsche, Maserati, Audi, Lexus, BMW, Ferrari and Jaguar. 
  3. An increasing number of Chinese OEMs, including Skywell, Leapmotor, Seres, Voyah, Hongqi, and DFSK, helped satisfy the Turkish market’s huge demand for affordable cars.

But underlying it all is "the delayed customer demand due to the pandemic caused supply and manufacturing issues", says Hakan Erdemir, Fleet Manager at Securitas Türkiye. 

"Türkiye achieved record automobile sales in 2023, reaching the 1.3-million mark. The main reason was the delayed consumer demand during the pandemic. However, for 2024, some industry leaders forecast a possible market shrinkage of up to 30%. What seems certain is that we can expect the market to be calmer in 2024." 

Still stormy 

While the passenger car market is settling down after a frenzy, the waters in the fleet market are still stormy. 

"On the fleet and leasing side, inflation and restricted access to funding and loans will continue to pressure the market. As these are major determinants of the vehicle leasing industry, it will continue to slumber, as it has since 2018,” says Mr Erdemir.

“The Turkish lease market comprises an estimated 250,000 vehicles. In 2024, we expect that number to increase by about 35,000.”

The 2023 reports released by TOKKDER, the Turkish Leasing and Rental Association, show a struggling market and low purchase power. Fleets generally still prefer ICE vehicles, with the share of EVs showing no significant growth. Despite those pessimistic findings, the lease market will have some relief when inflation goes down, says Okşan Öztürk, Managing Partner at Filo Broker, a leading fleet management company in Turkey.

"Fleet leasing companies don't have low purchasing power as it may appear. The financial status of companies is stronger than ever. In 2023, however, leasing companies could not acquire enough vehicles due to high demand in retail, causing vehicle supply issues to fleets and limitations in new credit opportunities."  

On top of these issues, the Central Bank of Türkiye changed its president in February, the seventh time in the last 21 years. This increased fears of instability. However, the Central Bank’s new measures may help control inflation while delaying the lease market's recovery. 

"The steps taken by the Central Bank to cool down the economy point to limited loan opportunities in 2024. In the second half of the year, we may see a drop in the interest rates following increased control over inflation and growth in the desire to provide loans from banks, and we believe the lease amounts could be executed at better prices. With the retail demand weakening, fleet purchases will go up in the second half of the year," Ms Öztürk says. 

Not fade away

With a population of more than 15 million, İstanbul is Turkey’s major hub not just in terms of corporate activity and private consumption but also for vehicle fleet activity. One of the experts observing the market very closely is the founder and CEO of Voltify, the first EV leasing company in Turkey. According to Mehmet Yiğit, the effects of high inflation will not fade away soon.

"The inflationary state is likely to continue in 2024", says Yiğit. "The biggest obstacles the fleets face to expand and replenish their fleets are the high-interest rates and decreased funding. 80% of the vehicle lease prices are financing expenses, and high-interest rates push the rental car prices." 

On top of these issues, the uncertainty in inflation and exchange equations makes it difficult to access loans, especially for used cars, while dropping the prices in this market and making predictions even more complicated. This is the biggest issue for the leasing companies, according to Mr Yiğit. 

But there are promising signs, too. Mr Yiğit expects a drop in retail sales and higher discounts from suppliers to leasing companies. "There will not be an issue of vehicle availability and supply in 2024. The vital issues are high financing expenses and the shrinking used car market." 

The main photo is courtesy of Shutterstock, 135507167.

Authored by: Mufit Yilmaz Gokmen