What's behind China carmakers' foray into Turkey following BYD deal?

Long hungry for foreign direct investment, Turkey appears to be finally making progress, as generous government incentives and the country’s economic bonds with Europe are drawing in Chinese carmakers seeking an easier access to European markets. 

On July 8, President Recep Tayyip Erdogan presided over the signing of a deal with China’s BYD, one of the world’s largest electric vehicle manufacturers, to build a factory in Turkey with an annual production capacity of 150,000 vehicles. The deal marks the first major foreign direct investment in Turkey’s automotive industry in 27 years. Under the deal, BYD will invest about $1 billion in the plant in the western province of Manisa. The land BYD will get is expandable so as to meet any further investment needs down the road. The plant is expected to become operational in late 2026 and create up to 5,000 jobs.

BYD Turkey’s director-general, Ismail Ergun, has expressed confidence that the brand would grow fast on the Turkish market and rank among the top three best sellers within a few years. Turkish automotive expert Emre Ozpeynirci believes the company could easily achieve its target. “They could well reach first place, not just the top three,” he told Al-Monitor.

Ozpeynirci stressed that the incentives the company was offered even before the plant has come into being — exemption from customs duties and reductions on the special consumption tax (SCT) with immediate effect — constituted an exceptional gesture by Ankara. The company would be able to sell imported vehicles while building the plant, he noted, estimating that a potential sale of 100,000 vehicles over two or three years could generate revenues that almost cover the factory’s investment cost.