East has met West in what is now modern day Turkey for nearly 4,000 years. Since as far back as the second millennia B.C., traces of what would become the Silk Road were established, bringing rare gems from Asian mines to ancient Europe. Through the time of the Ottoman Empire, Europeans traded their wealth for fine Asian luxuries such as silks and spices. In the early 21 century, not a lot has changed.
Turkey is still looked upon by Westerners as a gateway to the East. And for many in Asia, Turkey is often the first destination for their exports. But Turkey itself, by virtue of it’s straddling of two continents, has transformed itself into a key player on the world stage. It has become a manufacturing base for Europeans; it’s a regional political leader, and a key NATO ally in a politically unstable part of the world.
By virtue of its geography, Turkey considers itself neither European nor Middle Eastern. It’s both. And it’s neither. This has allowed Turkey to develop its unique character. This divided self has permeated all sectors of Turkish life. Though it is an Islamic republic, Turkey prides itself on its secular institutions. Its economy, while currently very strong, is often subject to fits and starts. And this dichotomy plays out into the automotive aftermarket segment as well. While segments of the aftermarket are highly brand conscious and loyalty driven, there is large and growing segment that is entirely price driven.
Turkey is the world’s 17th largest economy, with a GDP just over U.S. $ 1.7 billion. In the five years after the global economic crisis, Turkey has seen strong economic growth average 5.6 percent per year. In 2014, the growth moderated to about 2.9 percent. However, according to the World Bank, Turkey is considered a “middle class” country, as the average income for a high school graduate averages $10 per hour.
But keeping with its tradition of duality, Turkey is also a country of very rich and very poor. Turkey has more than 35 billionaires, which is good for fifth place in the world. Still, 15 percent of Turks live below the established poverty line. In a country of 81 million people, that’s still a very big number. Demographically speaking, Turkey does have an important advantage over its neighbors in Europe. More than 40 percent of the Turkish population is less than 24 years old, while only 6.7 percent of the population is over age 65. By contrast, Europe’s elder population is already topping 17 percent and will top 20 percent by 2020.
Having a financially sound population of young drivers will be very important in driving the growth of the aftermarket for many years to come. Turkey’s motor vehicle population has tripled since 1990, to about 18.5 million cars and trucks currently in operation. This makes Turkey double the size of Saudi Arabia, which has just over 9 million registered vehicles. With strong locally based manufacturing plants operated by Ford, Renault, Hyundai, Kia and Honda among others, the automotive industry in Turkey has become the second largest industrial sector behind textiles. These manufacturers are producing mostly for the local market, but more than 1 million vehicles per year are exported, mostly to Europe. Some models, like the Ford Transit Connect, are global platform vehicles. The Transit Connect is sold worldwide, including the U.S.
The car parc in Turkey is quite varied. The market share leader in Turkey is Renault, with approximately 18 percent of the market. Following close behind is the Volkswagen Group, then GM (Opel) and Hyundai. The top four brands represent 58 percent of the market. Owing to Turkey’s proximity to Europe, it’s no surprise that the luxury segment of the market is dominated by Mercedes Benz, BMW and Jaguar/Land Rover, with a combined 6 percent of the overall market. Fords, Toyotas, Nissans and Hondas are considered middle market vehicles, and together they represent another 20 percent of the market.
The structure of the Turkish aftermarket is similar to many other export markets. Warehouse distributors (WDs) often act as importers as well. The importers/WDs are mostly located in bigger cities like Istanbul or Ankara, the capital of Turkey. WDs resell to jobbers, but many have also set up “two-step” distribution systems. Some WDs will deliver up to several hours away, either through their main warehouse, or through satellite locations outside the big cities. Most major European buying groups have a presence in Turkey. Among them are Temot International, ATR, ADI and GAUI. It’s important to note that both Temot and ADI have established relationships with U.S. based counterparts, Automotive Aftermarket Parts Alliance and The Group (Pronto/Federated), respectively.
Like any other developed aftermarket, many distributors rely on supplier driven data to keep their businesses operating efficiently. In Europe, the dominant data supplier is TecDoc. TecDoc has developed a proprietary data platform that standardizes manufacturer data for conversion to catalog formats, similar to the ACES system used in North America. U.S. based manufacturers should note that ACES data isn’t directly compatible with TecDoc, and new data mapping would be needed to be developed to convert data to work on TecDoc systems.
Industry veterans debate the importance of major brands in Turkey. It’s argued that brands were once very important, but that importance has faded with the introduction of low-cost goods from eastern Asia. “The wealthier consumers are all about the branded product, but the average taxi driver in Istanbul is focused only on price,” says Ara Sakayan, vice-president of Eximus Corporation, a N.Y. based export management company that focuses on Turkey. He estimates the branded segment has eroded to about 25 percent of the market. But among those buyers he says, brand loyalty is very strong. “If they like your quality, they will never leave.”
One strategy to promote your brands and enhance its value proposition is to offer a robust portfolio. Typically, low cost competitors do not offer a full range of products, but focus on high volume, fast movers. “I think there is a place for U.S. brands in the [Turkish] aftermarket,” says Mike Behmoaras of Carlstadt, N.J. based ISC Industries, which imports and exports from Turkey. “As usual, you need a complete line offering.” He points out those low-cost suppliers are almost always offering a short line, and it would be difficult to try and compete solely on price.
Selling to Turkey isn’t necessarily complicated. As a long time U.S. ally, there are few regulations as to what can be sold to Turkey. However, Turkey does have strict regulations regarding the importation of chemicals that are similar to the European Union’s REACH standards. These standards involve a laborious documentation and legalization process. So chemical manufacturers should be forewarned about this caveat. However Turkey offers a variety of trade shows one can attend, including a local version of the Automechanika franchise. Turkish buyers are also prominent at many international shows, including AAPEX and the Automechanika shows held in Frankfurt, Shanghai and Dubai.
The U.S. Commercial Service is active in Turkey. They help U.S. exporters identify customers, arrange introductions and guide exporters through the transactions. Once an agent is aware of your company and its products, they will steer inquiries to you as well. There is usually no cost for these activities, but there may be a charge if more complex services are requested.
Another avenue for approaching the market is through export management companies (EMC). Turkey has several US. based EMC’s that are knowledgeable of the market, know the relevant customers for your products, and can help eliminate language barriers between you and the customers. EMC’s typically work like manufacturer’s representatives, but depending on the level of engagement you seek, can become more of an outsourced export department for your company. In many cases, EMC’s take the financial risk of selling upon themselves. U.S. based associations like the Auto Care Association and the Automotive Aftermarket Suppliers Association (AASA) each have segments that will help you find export partners and customers overseas.
If the economic trends continue to hold up, and political stability remains in place, Turkey is poised to remain a high-growth market for automotive aftermarket goods and services. With a young, economically well-off population, Turkey will continue to be one of the largest automotive markets in the Middle East. Or Europe. Perhaps both. And perhaps neither. It’s not easy to put your finger on where Turkey is. Perhaps the only certainty is that opportunities wait for those companies willing to seek them in Turkey.
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