Why Turkey can’t build its domestic car
President Erdogan has two grand visions for Turkey. The first is to dig a huge trench that divides the…
President Erdogan has two grand visions for Turkey. The first is to dig a huge trench that divides the peninsula of Trace North-South to create an alternative to the narrow Bosporus Strait for ship traffic. The second is to manufacture a %100 domestic car. Mind you, this is a very outdate vision. The first feat was achieved in Panama, the second by Ford in 1929. But, leaving aside the narrowness of Erdogan’s visons, both dreams are in trouble.
So far, no foreign company showed an interest in taking part or financing the Canal Istanbul trench, simply because as per Montreux Treaty it is not clear whether Turkey could route ship traffic to it. It is even more intriguing why Turkey’s mighty industrial machine has failed miserably in the second objective.
John Lubbock of Ahval News recounts the tragic tale of political ambition and cronyism trumping economic logic and sound business decision-making.
The idea of producing a ‘Domestic National Car’ for the Turkish market has been talked about for such a long time without any results that it is becoming a source of embarrassment for the Turkish government. The failures of the project also reveal underlying weaknesses in the Turkish economy.
Turkey’s first mostly domestic auto, the Anadol car began production in 1966 and ran until 1991, and by 2010 Turkey was the 6th or 7th biggest car manufacturer in Europe, producing cars for Fiat, Renault, Honda, Toyota and Ford. Yet the idea of having a Turkish national car brand remains a dream that the Turkish government has repeatedly promised to deliver.
President Recep Tayyip Erdogan’s government has made 2023, the centenary of the Turkish republic, a target to show how much economic progress has been made, especially since the ruling Justice and Development Party (AKP) came to power in 2002. Infrastructure projects have been a big part of advertising Turkey’s resurgence, and in 2017, five Turkish companies signed a partnership deal to work together on producing a new national car.
But the project has not been progressing smoothly. In 2015, Turkey purchased the license to the Saab 9-3 from National Electric Vehicle Sweden (NEVS), and was planning to build a hybrid car with an electric range of 60 miles before a gas motor kicked in. This does not compare favorably with the most up-to-date electric cars like the Nissan Leaf , which boasts an electric range of up to 235 miles. Science, Industry and Technology Minister Faruk Özlü announced last year that the government would invest $3.7 billion in the project, and that a prototype would be ready by 2019.
In July 2018, the deal between the Turkish government and NEVS for four prototype cars was ridiculed in Motoring Weekly , which said “the first two prototypes were never delivered and the electric sedan was – to put it politely – rubbish, with many faults and issues on arrival. So the only working prototype was the one that the consortium didn’t want! NEVS only had one job and appears to have messed that up somewhat.” The website also noted that economic problems with the devaluation of the lira had led to a decline in car sales in 2018 in Turkey. This also seems to have resulted in Tesla abandoning plans to launch in Turkey.
Legal disputes also emerged between the companies that make up the national car consortium (TOGG). As of April 2019, the TOGG website still says almost nothing. According to LinkedIn , TOGG has between 50 to 200 staff, which also does not seem enough for a project of this size.
Then, in an interview just before local elections on March 31, Erdogan criticized the Turkish companies who are working on the car for their lack of progress:
“Despite the fact that we provide them all the support and incentives unfortunately they underestimate the job. They say ‘we better see our president’… They shouldn’t waste our time. Otherwise we will have to search for other solutions … If necessary we will find interested investors abroad. We will provide them partner investors from Turkey as well. We will take steps to realize this as a common project here,” he said.
Lacking oil or gas of its own, Turkey’s economy is very vulnerable to exchange rate fluctuations, and the fall in value of the lira in 2018 hit motorists hard. So electric vehicles are seen as key to Turkish economic independence.
Building cars for foreign companies based on their patents is quite different from developing that technology domestically, and the Turkish government has not helped by failing to manage expectations. Fikri Işık, the former science and technology minister, boasted in 2016 that the national car would be “better and safer than Tesla’s car”, an idea that was ridiculed by Motor Authority .
So what are the possible causes of these ongoing production problems? An engineer at one foreign car manufacturer in Turkey suggested that the economics of making a Turkish branded car are simply unfavorable. He stated that “even if you make a Turkish brand, you will be dependent on European and American suppliers” for parts. He doubted that such a brand would be profitable without a distribution network abroad, and said that the government lacked commitment to seriously invest in industrial manufacturing outside of construction and large infrastructure projects.
A Turkish economist who declined to be named suggested that Turkish companies involved in the project know it is not financially viable. “Companies that constitute TOGG know that they will be compensated for their loss in making an agreement with Erdogan by making special agreements, or by taking financial privileges from the government.”
According to critics, the project is a political one; something that the government uses for propaganda purposes but lacks real long-term commitment to. In previous election years, the government advertised that it would build its own passenger planes, but never did. Bianet even suggested that claims made about a domestic passenger jet in 2015 were intended to distract from news about the Ankara massacre that year.
One last issue that is affecting Turkish manufacturing is the brain drain of educated Turks to other countries as a result of the political climate. “Our company lost 300 engineers to Europe and to the USA in the last two years,” the engineer at the foreign car manufacturer said.
The loss of significant numbers of engineers has also been reported at Turkey’s largest defence company Aselsan recently, which the company acknowledges on its own site . TUBITAK, the government’s science and technology council is offering scholarships of $24,000 a year for highly skilled people to return.
It seems that the Turkish government only has itself to blame for the ongoing failure to build a national car. If it wants to be realistic about the project, it should make an honest assessment of the whole industry and reassess its expectations. This should include a level of self-criticism about the reasons people are leaving Turkey that government officials are unlikely to be capable of undertaking.
Reprinted from Ahval News with permission