POWERFUL AND WEAK ASPECTS OF TURKISH AUTOMOTIVE SECTOR

 

Assoc. Prof. Dr. Sefer Gümüş

Deputy Dean of Faculty of Business Administration, Haliç University

 

·              Automotive production is the largest scale production organization in the world. Every year more than 60 million cars are produced. Worldwide competition keeps the number of basic producing firms at low figures. Fewer firms produce more.

·              Consumes 15% of steel, ¼ of glass and half of petroleum and rubber production in the world.

·              One of every 10 industrial business is related to automotive industry.

·              8 different industries, 250 different firms and 25.000 employees are required in order to produce 100.000 vehicles.

·              The second greatest automotive market after North America in the world is the EU. However both markets have reached production saturation.

·              Customer requests are gradually growing. Europe, in its traditional structure, is acting with security and environment consciousness, and side industrialists are coming forth with their innovative and distinctive designs.  Demand expectation brought about by the powerful economy has a positive effect on the market.

·              Car production in Eastern Europe, India, and China is growing rapidly whereas it slows down in Western Europe, US and Japan. China aims to meet 30% of the growing trend in the world’s whole automotive market until 2012.

·              In 2006, a total number of 1 million cars were produced in Turkey. Total automotive sector exports reached 14,5 billion Dollars where transportation vehicle export was 10,1 billion, side industry export was 4,4 billion USD. In 2006, 18% of the total export was realized in the automotive sector and the sector became the export champion in Turkey.

 

DEVELOPMENTS THREATENING THE SECTOR:

 

Price reaction, weakening profits, demand loss, capacity overage will become the new dimension of industry and this will cause the structure to shake in the near future.

  • Saturated industrial structure,
  • The structure insisting on growing at traditional markets,
  • Capacity overage in China, India and Western Europe,
  • Decreasing profit margins in vehicle prices due to competition,
  • High investment costs and fixed expenses due to high numbers of production requirement,
  • Decreasing incomes of industry shareholders,
  • Inefficiency of 2% growth in this market for the Turkish industry, 68% of whose exportation is done to Western European countries,
  • China’s finding supply resources in Africa and Middle East countries,
  • Turkish Lira’s gaining overvalue destroys competition power of the sector, where 70% of businesses deal with exportation.

 

NEW TENDENCIES IN THE SECTOR

 

•         Competition will grow at inexpensive car markets, which is becoming a big potential at especially growing  markets. The Japanese aim to find out cheap ways of car design and development, the French are working to produce ultra cheap automobiles.

  • Main industries who want to hold the R&D processes in their own hands as firm values are tending to bring first level suppliers into the fields where they have difficulties in competition and have them organize the supply chain.
  • Customer and support services are the fields where the main industry makes most of the investments.
  • India is still the best investment and supply center with high profit margins.
  • With its improved infrastructure and expert work power, China is still attractive in serving Asian markets and has an advantage of low costs.
  • Europe is moving its industry East to Bulgaria, Slovakia, Romania and Turkey.
  • Countries like Egypt, Jordan, United Arab Emirates and Ghana in the Middle-East and Africa will become attraction centers in the future.
  • Tendencies in the Market are: Focusing on the customer, price erosion, model variety, globalization and localization, compulsory environmental regulations, electronic dependence and manufacturer consolidation. 
  • Tendencies in the Industry: System Supplying, Supplier Consolidation, Cooperation Before Competition,  Platform Technology, Quickened Project and Renovation, Material Changes, New Delivery Network and Service Concept.

 

THE FUTURE PLAN OF THE TURKISH AUTOMOTIVE SECTOR

 

The automotive sector aims to grow its capacity to 2 Million cars per year while preparing its 2010 plans. For this purpose the planned investments are 3.5 Billion $ for capacity growth, 2 Billion $ for technology renewal, 3.5 Billion $ for new model investments to sum up to 9 Billion $ in total. This capacity means 25 Billion $ export size and employment possibility for 600 thousand qualified people.

 

POWERFUL AND WEAK ASPECTS OF AUTOMOTIVE INDUSTRY IN TURKEY:

 

POWERFUL ASPECTS:

 

•          Competition power potential.

•          Enough production capacity.

•          Very well trained, enterprising man power

•          Powerful side industry.

•          Application of international quality system management

•          Compliance with the international technical regulations

•          Full integration with powerful foreign partners

•          Improvement of R&D potential

•          Continual technology investment

•          Exportation experience

 

WEAK ASPECTS:

 

•         Lack of a national strategy

•         Instable market

•         Excessive number of firms, excessive import share

•         Insufficient main and side industry relations

•         Complicated selling taxation system and too high selling tax rates

•         Lack of organization in compliance with technical regulations

•         Quality / quantity loss in work power due to crisis

•        High real interest rates and basic input costs

•        Inadequate investment / exportation subsidies

•        Not having national trademarks: A strong state support is necessary for a national trademark, this support is given in countries like Malaysia, Korea, India, Iran and most of all China. Automobile import in Iran is totally banned, whereas it rates to 52% in Turkey. We do not need over protectiveness but the state should have a strategy and vision in this respect. One of the representatives of the sector TAYSAD, has handed in a master plan regarding the automotive industry to the authorized institutions of the state, and this master plan will lead the sector into the right way in the direction of a common vision and target. Individual works will be brought together to create.

Inefficiency in marketing: The sector has come to a certain level in quality but is still insufficient in marketing. Turkey should be able to market her position she has attained in this field.

 

SOLUTIONS SUGGESTIONS

1.      In order to improve our automobile industry, we should locate ourselves in the right position and define our targets at company and country basis. We should define what kind of customers class and what type of vehicles we are targeting as a strategic policy.

2.      It is very important to be able to design. Our firms should make a leap in this respect. European manufacturers are making a lot of profit in this field. Turkish firms should also have this ability and show it. Design is still a very important which brings a high surplus value Countries producing in other countries will not be able to hold this advantage in their hands for a long time. Design and R&D centers should also be moved to the manufacturing country. High technology should be used in design work. Of course, we should be able to train work power as to make use of high technology, procure patents of inventions and have them registered. We support TUBITAK’s efforts in this respect and wish that they become effective.

3.      The main industry should aim to make Turkey a design and production center. For the permanent production and exportation leadership of  automotive sector in Turkey the following work should be done:

•         Investment in design and product improvement,

•         Pre-competition cooperation.,

•         Increasing the rate of domestic parts,

•         Vernacularization in all pre-production phases such as design, improvement, prototyping and molding of new projects,

•         Increasing cooperation with side industry and help them globalize,

•         Strategy sharing and target clarity,

•         Total cooperation in bringing new projects to Turkey.

 

4.      The side industry should aim to be a player in the global automotive industry.

•         Institutionalization,

•         Investment in human resources,

•         Investment in technology and especially in R&D,

•         Correct use of purchase and financing resources,

•          Productivity – lean production – Kaizen applications,

•          Investment and project management,

•          International cooperation,

•          Supply chain, quality, cost,

•          Customer management,

•          Competitor analysis

•          Security and Insurance (product call back, risk of receivables, construction, fire) management,

all should be brought to a level that will ensure to take part in the global competition.