Why are car imports breaking records despite rising interest rates?

Despite the increases in interest rates and the high evolution of prices, imports of consumer goods broke a historical record in October.

In the January-October period, imports of consumer goods increased by 62.7 percent compared to the same period last year and reached an all-time high of $38.9 billion. In October it broke a record by reaching $4.7 billion, with an increase of 78.2 percent annually.

Imports of motor vehicles, which belong to the category of consumer goods, reached $3.3 billion in October, an increase of 105 percent compared to the same month last year, and were only $34 million below from July’s record level.

SALES OF IMPORTED VEHICLES EXPLODE

In October, sales of automobiles and light commercial vehicles in Turkey increased by 55.4 percent compared to the same period last year, breaking a record with 101,367 units. 63,763 of these were imported vehicles.

Sales of automobiles and light commercial vehicles grew by 63.7 percent in the January-October 2023 period compared to the same period of the previous year, reaching 958,942 units. This

In the January-October 2023 period, automobile sales increased by 67.8 percent compared to the previous year, reaching 749,501 units, and the light commercial vehicle market grew by 50.6 percent and reached 209,441. units. 619,143 of these were imported vehicles.

In October 2023, automobile sales increased by 74.1 percent compared to the same month of the previous year and reached 82,611 units, while the light commercial vehicle market grew by 5.5 percent and reached 18 1,756 units. The market for automobiles and light commercial vehicles increased by 55.7 percent in October compared to the average sales of the last 10 years.

WHY IS IT INCREASE?

The economic leadership says it wants to reduce consumption in general and car imports in particular to solve the two big problems of the current account deficit and inflation.

Interest rate increases and credit restrictions are intended to be effective in this regard. However, figures indicate that automobile consumption and imports are at record levels.

So why do new vehicle sales and imports remain high despite interest rate increases, credit restrictions and advertising measures?

Representatives of the automobile industry point to four main reasons.

1- THE SUPPLY PROBLEM WILL BE ELIMINATED

The supply problem that the automobile industry has been suffering from for about 3-4 years has been largely resolved recently. This led to the emergence of a delayed lawsuit.

Assessments that the auto supply problem has been eliminated were also reflected in the inflation report announced by the Central Bank (CBRT) last week.

2- DISCOUNT CAMPAIGNS

When the supply problem was resolved and sales slowed in September, many companies launched discount campaigns in October. Additional demand occurred due to discount campaigns.

Discount campaigns continue to increase in November, which once again keeps sales at high levels.

According to TUIK, annual inflation in the automobile sector in the third quarter was 72.91 percent. Despite the discounts, the profitability of automotive companies remains higher than in previous years.

3- INVESTMENT INSTRUMENT IN HIGH INFLATION ENVIRONMENT

In the high inflation environment, cars began to stand out as an investment tool rather than their use value. As housing prices became unaffordable for many people, the trend toward cars as an investment tool also increased.

The current expectation that prices will continue to rise continues to drive demand.

4- REDUCTION OF SCT IN ELECTRIC VEHICLES

To increase sales of the national car TOGG, the government gave an SCT discount on electric cars. This situation increased the demand for imported electric vehicles. There is growing interest, especially in Chinese electric vehicles.

WHAT ARE THE EXPECTATIONS?

Auto industry representatives expect sales to remain high for a few months and then decline due to the effect of high interest rates.

The discount campaigns are expected to continue in November and December.

With the update of the base of the Special Consumption Tax that will come into force next year, the limit set for disabled vehicles will increase. This is expected to generate additional demand early in the year.