BYD, one of the world’s largest electric vehicle (EV) manufacturers, has announced a significant US$1 billion investment in Türkiye, marking a pivotal moment for the country’s automotive industry. This investment not only highlights Türkiye’s growing importance as a regional hub for EV manufacturing but also positions the country as a key player in the global shift toward electrification. The investment aligns with Türkiye’s strategic goals of boosting local production, strengthening logistics, and attracting more multinational companies in the era of nearshoring. Additionally, Türkiye’s Free Trade Agreement (FTA) with the European Union (EU) and its robust automotive infrastructure make it an appealing destination for international investments, especially as the European Commission (EC) imposes tariffs on Chinese EV brands. With BYD’s strong vertical integration capabilities, the investment is expected to spur further development in EV-related industries, including battery production and renewable energy. This move may also prompt other global manufacturers to consider Türkiye as a manufacturing base, reinforcing the country’s position in the global EV market.

Turkish Electric Vehicle Market Overview

Türkiye’s automotive industry is undergoing a significant transformation as global demand for electric vehicles (EVs) accelerates. Once primarily focused on traditional vehicle manufacturing, the country is now positioning itself as a key player in the EV market, bolstered by strategic investments, favorable government policies, and an evolving supply chain infrastructure. Major global and local manufacturers have begun shifting their production toward EVs, supported by Türkiye’s advantageous location, skilled workforce, and well-established logistics capabilities.

Current EV Market Size and Growth Trends

Türkiye’s automotive industry has followed a unique trend in recent years. Even before the COVID-19 pandemic, car sales were already on a downward trajectory, with a decline in 2019. However, the market rebounded dramatically, reaching a record-breaking sales figure of over 1 million vehicles in 2023,[1] the highest in the country’s history. This included a significant surge in EV sales, which jumped from 8,000 in 2022 to 66,000 in 2023,[2] despite high inflation and limited car financing options. The growth at a slower pace is expected to continue, as sales figures from January to July 2024 show further increases over the same period in 2023.

Although Türkiye faced global vehicle supply chain challenges, particularly in 2022, it has maintained strong production levels, manufacturing around 1 million cars annually,[3] with 70% of these being exported to global markets. Major manufacturers like Ford, Hyundai, Tofaş (Stellantis), Renault and Toyota have established a solid presence in Türkiye, which ranks as the 3rd largest automotive producer in the EU and 12th globally.[4] Additionally, Türkiye serves as a critical hub for over 1,100 component suppliers, including industry leaders like Bosch, Valeo, Delphi, and Sachs. These show that Türkiye is well-equipped to integrate EV production into its broader automotive sector.

The automotive sector accounts for 5.5% of Türkiye’s GDP and remains the country’s top export industry, generating US$35 billion in 2023.[5] Türkiye’s strategic location, with proximity to the EU via road and sea routes, makes it an attractive hub for multinational companies. The growing trend of nearshoring further solidifies Türkiye’s position as a competitive player in the global automotive landscape. As EV demand rises, Türkiye’s established capabilities offer a strategic advantage for scaling production and exports, especially within the EU market.

Key Players, New Entrants, and Competitive Landscape

EV manufacturing in Türkiye is not new, since a handful of companies that have local vehicle production in Türkiye have been transforming their plants and operational plans for some time. Hyundai began producing hybrid versions of the i20 and Bayon in 2020 in Kocaeli, Ford launched the all-electric Transit in 2022, and Toyota has manufactured its plug-in hybrid model CH-R as of 2023, while Renault plans to begin producing hybrid and EV models in Türkiye by 2027. The most significant local manufacturing initiative has come from the fully electric brand TOGG with a US$2 billion local investment. TOGG (Türkiye Otomobil Girişim Grubu, Türkiye Automotive Joint Venture Group) rolled out its initial model in 2023 after around US$2 billion investment and started construction of a local battery manufacturing and R&D plant, SIRO, a joint venture with the Chinese battery maker Farasis that will reach 20 GW capacity by 2031.

BYD’s announcement of a US$1 billion investment by 2026 to manufacture plug-in hybrid and fully electric vehicles comes on top of this ecosystem. This marks a pivotal moment for Türkiye’s automotive industry, as it is the first major investment by an OEM in the Turkish market in 26 years. These developments highlight Türkiye’s growing engineering capabilities in the automotive sector, which continue to evolve alongside local production efforts.

Besides production, a handful of new brands have entered Türkiye for imported sales, such as BYD, MG, Tesla, Leap, Skywell, and SWM Motor, thus increasing the competition more than ever. To overcome this challenge, especially with the lower pricing of Asian brands, the Turkish government imposed a rule to open at least 20 dealers in seven regions of Türkiye for brands with any models imported from non-FTA countries, along with a local call center with at least 40 representatives. This includes not only Asian brands but any other European brands that have a model manufactured, such as in Japan. While Original Equipment Manufacturers (OEMs) are trying to waive this, the rules are pushing more and more Asian brands to consider local investments in Türkiye. Specifically for Chinese brands, a 40% import tax was introduced in Türkiye, similar to the policy in Europe as of 2024 but with different rates. However, companies that invest locally in Türkiye are exempt from this tax, further incentivizing local production.

Government Policies and Incentives Promoting EV Adoption

As the global transition toward electric vehicles accelerates, Türkiye has positioned itself as a key player in the EV market through a series of strategic policies and incentives. Recognizing the environmental and economic benefits of EV adoption, the Turkish government has implemented measures to make EVs more accessible and affordable for consumers. These efforts are designed not only to reduce carbon emissions but also to modernize the country’s automotive industry and attract international investments.

In recent years, Türkiye has increased incentives for EVs to promote environmentally friendly alternatives. Car purchases in Türkiye are typically impacted by the Special Consumption Tax (SCT), which ranges from 45% to 220%,[6] including a 20% VAT, depending on the vehicle’s engine size and price. However, as of 2023, the SCT rates for EVs have been significantly reduced to between 10% and 60%.[7] Additionally, vehicle credit limits, which are strictly regulated by banks and typically range from 20% to 70% of the vehicle’s price (with a maximum credit of 400,000 TRY, or US$12,000 with the current exchange rate), have been considerably increased for EVs. As of 2024, consumers can now access up to 1 million TRY (US$30,000) in vehicle credit for EV purchases. OEMs are also offering attractive incentives, such as free home charging and charging campaigns, making EV ownership more appealing. Moreover, the rising cost of fuel in Türkiye has made EVs an economical option, particularly in the premium segment, further driving consumer interest in alternative powertrains.

The number of EV charging stations in Türkiye has surged dramatically, reaching 21,000 by 2024[8] compared to just 1,000 in 2020. Incentives introduced in 2022, amounting to 300 million TRY (US$8 million) for fast-charging infrastructure, have played a significant role in this growth, along with installation loans offered by banks, which have made the setup process smoother. There are currently 173 companies holding charging station operation licenses,[9] although a considerable number are expected to lose their licenses due to failure to meet regulatory requirements.

Infrastructure Development for EVs

In terms of infrastructure, Türkiye’s electric distribution network is considered balanced and has been able to meet the demand so far. New regulations for energy storage systems, aimed at both commercial and residential use, mandate that energy storage must match the capacity of renewable energy produced. However, the prevalence of apartment living and limited space in urban areas make residential implementation challenging. Additionally, bidirectional energy transition concepts are still relatively new to the Turkish market. As a result, these recent regulatory updates are likely to benefit corporate sites more, particularly in supporting their EV fleets.

Overview of Investments

After TOGG’s US$2 billion investment, the number of vehicles manufactured at the TOGG facility is expected to reach 1 million by 2030,[10] with 70,000 vehicles projected for 2024. This number includes 20,000 pre-ordered vehicles from 2023 that will be delivered this year. TOGG is also planning to expand sales into Europe at the beginning of 2025, which supports its production target. However, the simultaneous introduction of new models to the production line could stretch resources, making overall targets seem potentially overambitious for a young brand. TOGG’s vertical integration plans, including battery manufacturing and the establishment of the SIRO R&D center (Siro Silk Road Clean Energy Storage Technologies), have also attracted a US$56 million[11] credit from ICBC, with repayments beginning in two years. This funding will accelerate the supply of locally manufactured EVs and support expansion into industrial applications, maritime vehicles, and energy storage for renewable energy. The facility, located in Gemlik with access to sea transportation, is expected to export batteries to other countries, contributing to the Belt and Road Initiative announced (BRI) in 2015. This initiative aims to enhance Europe-Türkiye connectivity through railroads and highways.

Following BYD’s investment announcement in Türkiye, production is projected to commence by 2026, with an annual capacity of 150,000 vehicles. While this is a significant development, BYD’s entry as a global leader in EVs could bring new competition to TOGG to potentially widen the gap between the latter’s sales targets and actual figures. The investment is expected to generate around 5,000 job opportunities in Manisa, a strategic location near Türkiye’s west coast and one of its largest ports, Aliağa, in Izmir. With sea transportation accounting for 56%[12] of Türkiye’s exports and 54%[13] of its imports, and motor vehicle parts being the top export via this mode, Manisa is well-positioned as a scalable investment hub. Aliağa, the second-largest port after Kocaeli, further strengthens the region’s potential for logistics and trade.

Türkiye’s FTA with Europe has significantly influenced BYD’s decision, especially as the EC has begun imposing tariffs on Chinese EV brands due to competitive pricing pressures, which local European OEMs struggle to match due to higher labor costs. Chinese OEMs now face import tariffs ranging from 17% to 40%,[14] depending on factors such as the parent company’s revenue and the estimated subsidies received, on top of an existing 10% tax.[15] For BYD, strong connectivity to the EU market is crucial as it competes with Tesla. BYD is also planning a manufacturing plant in Hungary, scheduled to be operational by 2025 with an annual production capacity of 100,000 vehicles.[16] This plant will compete with Turkish facilities in supplying the European market.

Meanwhile, BYD has already begun shipping 3,000 EVs[17] to Germany via LNG-powered vessels, aligning with the EC’s goal of reducing emissions from the shipping sector, demonstrating the ambitious movement of EVs to Europe while scaling with nearshoring in Hungary and Türkiye. Emission targets in shipping include cutting 50%[18] of emissions from voyages that begin or end outside the EU starting in 2024. Additionally, Türkiye’s potential for building green ships in local shipyards, which already serve EU ports, presents another opportunity for growth and ease of doing business in the region.

Several other key developments stand out in the market. Eldor, a manufacturer of EV components, made a US$100 million[19] investment in the Izmir Free Trade Zone in 2021. Chinese automaker GAC is in discussions with TOGG about a potential future joint venture. Another significant automotive investment came from ZF, which invested US$45 million[20] in its Sakarya brake plant, set to produce parts for both electric and non-electric vehicles. Recently, SWM Motor, an Italian EV manufacturer under the Chinese Sineray Group, applied to invest in Türkiye, aiming to establish a production facility with a capacity of around 50,000 vehicles.[21] SWM began selling its vehicles in the Turkish market in 2023.

Contrary to these promising investments, however, in 2023, Ford’s local parent company Koç Holding’s proposed partnership negotiations with LG Chem and SK Innovation to build a battery assembly plant were cancelled due to insufficient demand, possibly after a downward revision of EV manufacturing targets. In the future, the balance between fostering local innovation with TOGG and welcoming foreign investment from companies like BYD will likely depend on Türkiye’s broader industrial and energy policies, including plans to reduce carbon emissions and position itself as a player in the global EV market.

Future Trends of EV Market and Adoption in Türkiye

Türkiye stands at a critical juncture in its transition to becoming a regional leader in EV production and innovation. With significant investments from global players like BYD and the support of favorable government policies, the country is well-positioned to capitalize on the growing demand for EVs both domestically and abroad.

Growth Potential

The Turkish EV market is expected to grow rapidly, though at a slower pace compared to previous years, which will help reduce the average age of the vehicle fleet, currently 14.5 years as of 2023.[22] This growth will be supported by eased credit lines and lower SCT rates for electric vehicles. Since vehicle leasing is not available to private customers in Türkiye, purchasing remains the only option for ownership, which benefits OEMs by increasing profits through direct sales.

In Europe, while the growth rate of EV sales has slowed, strict emissions regulations and significant home charging incentives, integrated with renewable energy solutions at both residential and commercial levels, continue to drive demand for batteries and alternative powertrain vehicles. This solidifies the export demand for EVs to Europe for companies investing in Türkiye.

Opportunities for Collaboration and Strategic Partnerships

Türkiye’s strategic location, educated workforce, FTA with the EU, robust logistics infrastructure across various modes of transport, and a well-established automotive industry make it an attractive option for companies seeking regional bases in response to deglobalization and near-shoring trends. BYD’s investment is expected to attract additional companies to view Türkiye as a key regional hub, given its access to 1 billion consumers, combining the EU, FTA partners across 30 countries, and the local market.

Key parts manufacturers that are already established in Türkiye are expected to increasingly pivot toward producing components specifically for EVs, a shift that is likely to drive further investments into the country. As the demand for EVs rises globally, these manufacturers will need to retool their production lines and adapt to the technical requirements of EV components, such as battery systems, electric drive trains, and lightweight materials. This transition will not only bring new capital and advanced technologies into the sector but will also create opportunities for local suppliers and subcontractors, fostering the growth of a more specialized EV supply chain.

In parallel, Türkiye’s overall automotive supply chain and distribution networks are undergoing significant evolution due to disputes happening in the region and neighboring countries. With its strategic location bridging Europe, Asia, and Africa, Türkiye is enabling the distribution of automotive parts, especially as demand for EV-related components grows. Türkiye’s logistics infrastructure, including access to major ports, roads, and rail networks, supports efficient trade routes that connect to key markets, making it an attractive base for parts distribution.

BYD, known for its strong vertical integration, may leverage Türkiye’s strategic location to handle downstream operations. This would enable the company to supply parts not only to Europe but also to emerging markets in the Middle East, Africa, and Central Asia, further strengthening Türkiye’s role in the global EV supply chain.

The Road Ahead

The shift toward electric mobility is not only transforming Türkiye’s automotive industry but also driving advancements in renewable energy, logistics, and material sciences. The energy sector will also see significant growth, driven by the increased demand for renewable energy at business sites, integrated with energy storage solutions. The logistics industry plays a crucial role, with several companies that operate truck fleets between the EU and Türkiye already ordering electric trucks and offering zero-emission solutions, or multimodal options combining truck, train, sea, or air transport.

Türkiye’s logistics connectivity to the EU is highly attractive to international brands, as trucking is typically cost-effective and offers fast delivery. The potential to attract global clients for zero-emission or hybrid engine shipbuilding could further enhance automotive transportation capabilities. The chemicals industry is another sector poised for growth, as EV production demands specialized materials like lightweight alloys, rare earth elements, and battery-related chemicals such as lithium and nickel. Türkiye’s local chemical and materials industries could expand to meet this rising demand. Green financing from international sources is expected to flow into Türkiye, especially for large-scale local projects and partnerships.

Crucially, expertise in EV engineering will advance, fostering local research and development in raw materials and potentially driving the creation of more cost-effective and scalable battery alternatives. Türkiye’s substantial reserves of salt and trona, which contain sodium, position it as the second-largest trona reserve globally, after the U.S. Given that Türkiye’s automotive manufacturing traditionally focuses on plastics, metal parts, braking systems, and electrical components, a technological shift toward EV production will not only diversify the industry but also enhance skilled manufacturing capabilities.

As Türkiye continues to attract more multinational companies and bolster its manufacturing capabilities via advanced education and training programs, its strategic location and strong trade ties with Europe will offer a competitive advantage in the global EV market. These developments bring exciting prospects for Türkiye, allowing it to better utilize its resources, enhance its manufacturing capabilities, and become more competitive on the global stage. The ripple effect of these developments is expected to enhance economic stability, strengthen the value of the Turkish lira, and improve the nation’s overall economic well-being.

[1] ODMD, “Passenger Car and Light Commercial Vehicle Retail Sales,” 2024, https://www.odmd.org.tr/web_2837_1/neuralnetwork.aspx?type=36.

[2] ODMD, “Passenger Car and Light Commercial Vehicle Market Evaluation,” 2024, https://www.odmd.org.tr/web_2837_2/neuralnetwork.aspx?type=35.

[3] OSD, “Automotive Industry Monthly Report,” 2024, https://www.osd.org.tr/saved-files/PDF/2024/01/14/12-2023-OSD_Aylik_Degerlendirme_Raporu.pdf.

[4] Presidency of The Republic of Turkiye Investment Office, “Automotive Facts,” 2024, https://www.invest.gov.tr/en/sectors/pages/automotive.aspx.

[5] OSD, “Trade Report,” 2024, https://www.osd.org.tr/saved-files/PDF/2024/06/21/OSD%20Dış%20Ticaret%20Raporu_2023.pdf.

[6] Revenue Administration, “Special Consumption Tax Rates,” 2024, https://www.gib.gov.tr/yardim-ve-kaynaklar/yararli-bilgiler/ozel-tuketim-vergisi-tutarlari-ve-oranlari.

[7] Revenue Administration, “Special Consumption Tax Rates,” 2024, https://www.gib.gov.tr/yardim-ve-kaynaklar/yararli-bilgiler/ozel-tuketim-vergisi-tutarlari-ve-oranlari.

[8] EPDK, “Charging Service Market Monthly Statistics July,” 2024, https://www.epdk.gov.tr/Detay/Icerik/3-0-222-1040/enerji-donusumusarj-hizmeti-piyasasi–istatistik#.

[9]  Green Economy, “EPDK Has Started Cancelling The Charging Network License,” 2024,  https://yesilekonomi.com/epdk-sarj-agi-lisans-iptallerine-basladi/.

[10] TCCB, “Speech Delivered at the Groundbreaking Ceremony of the SIRO Battery Development and Production,” 2023, https://www.tccb.gov.tr/konusmalar/353/145884/siro-batarya-gelistirme-ve-uretim-kampusu-temel-atma-toreninde-yaptigi-konusma.

[11] ICBC, “ICBC Turkey Annual Report,” 2023, https://www.icbc.com.tr/en/images/pdf/2023.pdf.

[12] Ministry of Trade, “Trade Logistics,” 2024, https://ticaret.gov.tr/data/5b87bf9113b8761160fa1258/Dış%20Ticaret%20Lojistiği%202024.pdf.

[13] Ibid.

[14] European Commission, “Commission imposes provisional countervailing duties on imports of battery electric vehicles from China while discussions with China continue,” 2024, https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3630.

[15] European Commission, “Questions and Answers on the pre-disclosure of duties on imports of subsidised electric cars from China,” 2024,  https://ec.europa.eu/commission/presscorner/detail/en/QANDA_24_3232.

[16] BYD, “BYD to Build A New Energy Passenger Vehicle Factory in Hungary for Localised Production in Europe”, 2023, https://www.byd.com/eu/news-list/BYD_to_Build_A_New_Energy_Passenger_Vehicle_Factory_in_Hungary_for_Localised_Production_in_Europe.html.

[17] Marine Insights, “BYD’s Explorer No.1 Arrives With 3,000 EVs In Germany, Transforming Global Auto Market,” 2024, https://www.marineinsight.com/shipping-news/byds-explorer-no-1-arrives-with-3000-evs-in-germany-transforming-global-auto-market/.

[18] European Commission, “Reducing emissions from the shipping sector,” 2024, https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en.

[19] Presidency of The Republic of Turkiye Investment Office, “Italia’s Eldor Invests in Türkiye,” 2021, https://www.invest.gov.tr/en/news/news-from-turkey/pages/italia-eldor-invests-turkey.aspx#:~:text=%E2%80%8B%E2%80%8BItalian%20Eldor%20Group,Official%20Gazette%20on%20March%2019.

[20] Presidency of The Republic of Turkiye Investment Office, “Mobility Industry in Turkiye 2024,” 2024, https://www.invest.gov.tr/en/library/publications/lists/investpublications/mobility-industry.pdf.

[21] SWM Motor TR, “SWM Motor Applied for Production in Turkey!,” 2024, https://swmtr.com/2024/07/11/swm-motor-turkiyede-uretim-icin-basvurusunu/.

[22] Turkish Statistical Institute, “Road Motor Vehicles, December 2023,” 2024, https://data.tuik.gov.tr/Bulten/Index?p=Motorlu-Kara-Taşıtları-Aralık-2023-49432&dil=1#:~:text=Türkiye’de%202023%20yılı%20sonu,yaş%2014%2C5%20olarak%20hesaplandı.