Aysel YÜCEL – AUTONOMY
■ The automotive market, which went into standby mode with rumors of SCT at the end of July, was mixed again with the intervention signals from the government wing last week. Added to the supply problem, difficulties in accessing finance, and uncertainty about rising prices, the recession increased in both the new and second-hand markets.
■ Speaking to WORLD, sector officials said that temporary measures are more damaging to the market and that a fundamental system change is needed to solve problems, especially taxes. The real threat in the sector is seen as the cheapest new car to move towards 500 thousand TL rather than second hand prices. While access to new cars has become increasingly difficult in Turkey due to the increase in exchange rates and high inflation, as well as financial difficulties, the government’s recent interventions, especially in the second-hand market, have thoroughly confused the automotive market. In the market where uncertainty increased, sales started to decline both at zero and second hand. Stating that the steps taken have magnified the problem of trust rather than normalization in the market, sector representatives are waiting for a radical solution to the problems.
The automotive market left behind a very active week. The market, which had stagnated with the rumors of the excise duty reduction in the previous week, was mixed with the news from the government last week. First of all, Minister of Commerce Mehmet Muş’s statement that they are working on a regulation that will bring 6 months and 6 thousand kilometers limit to companies, galleries and rental companies after the sale of brand new vehicles they bought, shocked the market. Then, the Competition Authority (RK) launched an investigation against the four leading second-hand companies of the sector on the grounds that they violated Article 4 of the Competition Law. Before the market got over the shock of these developments, Treasury and Finance Minister Nureddin Nebati stated that he had plans to increase the SCT in a meeting. Then, with the tweets he sent last Friday, he announced that this was a joke and that the SCT reduction was not on the government’s agenda. According to a rumor that emerged last week, the government is preparing to increase the excise duty on ultra-luxury vehicles. All these developments caused the stagnation in sales in the automotive market to increase.
Speaking to the WORLD, representatives of the automotive sector emphasized that the steps taken by the government to prevent exorbitant prices, especially in the second-hand market, will have a limited effect on its purpose. According to some, such measures do more harm to the market. Industry representatives stated that the main problem is the exchange rate, difficulties in accessing consumer finance, high interest rates and a tax system based on SCT, which is unique in the world. Authorities emphasized the need to review all aspects of the taxation structure applied to the Turkish automotive industry by taking the opinions of all stakeholders instead of temporary measures.
Ali Haydar Bozkurt, President of the Automotive Distributors Association (ODD), evaluated the developments in the market last week to the WORLD. Evaluating the preparations for the 6-month and 6 thousand km limit for the sale of brand new vehicles purchased by the companies, Bozkurt said, “The primary target with the new regulation studies is to reduce the ‘balloon’ prices of second-hand vehicles. It is aimed to prevent zero kilometer vehicles from falling into the gallery market. Zero kilometer will not affect the sales of vehicles, because the availability of new vehicles continues to be slightly below the demand. He said that the regulation will affect the institutions that will queue for a new vehicle and buy the vehicle directly in order to sell it, but it will have a limited effect on real people. Bozkurt emphasized that the normalization of the new vehicle supply will eliminate this situation.
Normalization is possible with an increase in supply and a decrease in exchange rates.
Stating that the excise tax rhetoric that occupied the agenda last month, especially in second-hand vehicles, caused some stagnation and thus a slackening in prices, Bozkurt said that it will be seen over time whether its effect will be long-term. Bozkurt said, “After all, there is still not enough supply on the new vehicle side. The increasing number of COVID-19 cases around the world has started to put pressure on production again, and the currency-based cost of the automobile in production continues to increase. Considering all these, it seems that under normal circumstances, the supply problem will be a little difficult to solve in the near future. Unfortunately, as with every product whose price is expected to increase continuously and there is a shortage of supply, the processes we are going through at the moment come to the fore. Let’s hope that the supply problem is solved as soon as possible, the increase in the production costs of vehicles based on foreign currency ends, the exchange rate does not increase against TL so that we can gradually return to normal market conditions,” he said.
Emphasizing the need to re-evaluate all aspects of the taxation structure applied to the Turkish automotive industry, Bozkurt said, “It is important for Turkey to look at the automotive industry more strategically. Automotive industry is one of the important industries of developed and developing countries. In order to protect and support this, we need to take the necessary steps together within the framework of a sustainable medium-term plan in order to adapt to the changes taking place in the world. In order for consumers in our country to prefer new technologies in parallel with the developments in the world, the issues should be handled in every aspect and revision practices should be started after the necessary preparatory work, especially taxation.
No hope of SCT reduction, expectation of base update increased
The market, which despaired of the SCT reduction, increased its expectation for the tax base regulation. Because new car prices continue to rise. With the new hikes in August, the number of models under the 80 percent SCT segment has decreased to two. This number exceeded 10 in July. The price of the cheapest car was based on 400 thousand TL. The number of models under 400 thousand TL does not exceed the fingers of one hand. Making a statement on this subject, ODD President Ali Haydar Bozkurt said, “I don’t think there will be a decrease in the SCT, but it should be noted that the tax base should be updated and the SCT application should be reconsidered in a way that encourages new technologies. In the Special Consumption Tax (SCT) applied to motor vehicles, a gradual system was introduced as of 2016. In today’s conditions, the absence of a model that can benefit from low tax brackets causes unjust treatment for consumers. As of today, most of the models on sale are in the 80 percent tax bracket. When we look at it today, there has been an expectation in the sector regarding the updating of the base amounts, especially at the point where the prices have come due to the exchange rates, since almost all models are included in the 80 percent SCT segment.”
“Zero used vehicles are bought and sold by individuals rather than companies”
Melih Mutlu, General Manager of the second-hand company Otoshops, stated that not selling new vehicles before 6 months and 6 thousand kilometers after the first registration will definitely prevent opportunism, but it cannot prevent such sales made through individuals. Mutlu said, “For the fundamental solution of the problem, a wholesale regulation in the tax system should be made”. Mutlu also said that high loan interest rates and difficulties in accessing long-term loans continue to stand in the way of the market. Muhammed Ali Karakaş, CEO of Otomerkezi.net, one of the second-hand vehicle companies, made similar statements and said, “Today, 1 out of every 30 people in Turkey is engaged in the business of buying and selling cars, and the regulation introduced does not cover individuals. A decrease in prices by 5-6 percent. “We anticipate that this will happen. However, there are many issues that need to be resolved, such as the exchange rate, high interest rates faced by the citizens in consumer financing, and the problems in our tax system, and these are the factors that will affect the prices. Our country now needs an automotive ministry that has a full command of the dynamics of the sector.” On the other hand, according to the information obtained by DÜNYA, some representatives of galleries and dealers in the sector met last week and discussed the possible consequences of the 6-month sales ban on new cars. Sector officials at the meeting, arguing that individual consumers rather than companies sell brand new vehicles second hand, united in the opinion that if a similar restriction is not imposed on individuals, the impact of the importance to be taken will be limited to the market. Authorities are making a plan to transfer this common view to the public.
“SCT should be abolished, only VAT should be taken”
Albayrac, one of the well-known names in the luxury vehicle market, and Ferhat Albayrak, the Founder of Minoto, emphasized that the tax system in the Turkish automotive industry should be changed radically and said, “As in the USA and the EU, only VAT should be taken from the automotive sector, and the SCT should be completely abolished. All other actions taken do not only make the market worse. “The situation we are in is about the supply-demand balance, not with opportunists or similar organisms,” he said. “It’s a mess, we can’t see anything but a cloud of dust” An automotive dealership official speaking to DÜNYA explained the impact of the latest developments on the market with these words: “It’s a mess. Sales are falling. Unfortunately, we have difficulty in interpreting why. It is not easy to understand why. Customer entries decreased. We see that second-hand sales are more affected. I think sales will be serious. We can see nothing but a dust cloud.”