As part of efforts to increase the automotive sector’s annual exports in Turkey to $75 billion in the next decade, the government has doubled tax breaks on investment in this industry, according to Economy Minister Zafer Caglayan. Turkey will have to increase exports in order to cut its present account deficit, the main economic weakness in the nation and a major factor holding it back from getting an eagerly awaited second investment grade rating. This investment scheme, which extends from a program that debuted in 2009, will provide tax breaks of as big as 60% for new investments, a 30% increase from last year, and incentives that include deductions on employee costs. In a news conference, Caglayan said that they’re going into a new chapter in this sector where they’re using a “new road map.”
Turkey hopes to increase exports so that it could reduce a big current account gap due mostly to the quick-growing economy's high energy imports and ensuing trade deficit. The government is aiming for $500 billion of total exports by 2023. Of this figure, $75 billion is from the auto industry compared to $20 billion from the sector in 2012. The declining domestic market and lowering demand from debt-ridden Europe last year had led to struggles in the automotive industry, which builds vehicles and parts mainly for export.
This is why sales declined by 10% to 818,000 units and exports fell 8% last year. Europe makes up for around 70% of auto exports in Turkey. This government scheme, which has been subjected to an annual review since 2009, benefits manufacturers like Ford Otosan, Oyak Renault, Tofas, Hyundai and Toyota. The Official Gazette confirms a Reuters report from Thursday that states that projects that qualified under the latest revision will include vehicle investments of over 300 million lira ($170 million), engine investments of higher than 75 million lira and spare parts projects of over 20 million lira.