Geopolitics on Wheels: The Repositioning of the Turkish Automotive Industry

Growth, innovation, and export power

Since the introduction of the Customs Union between Turkey and the European Union (EU) in 1996, the EU has become Turkey’s most important trading partner. Among the EU countries, Germany is Turkey’s key trading partner. Regarding the automotive industry, Turkey’s tariff-free access to the EU single market has, on the one hand, con­tributed to an increase in vehicle pro­duction in Turkey: from 300,000 vehicles in 2002 to 1,332,755 in 2024, of which 980,341 were passenger cars. On the other hand, the country benefits from deeper integration into European value chains and has become an attractive production loca­tion for international automobile manufacturers and suppliers.

The largest players in the Turkish automotive industry include joint ventures with international car manufacturers: Anadolu Isuzu, TOFAŞ-Stellantis, Ford Otosan, BMC (British Motor Corporation, currently a Turk­ish-Qatari joint venture), Mercedes-Benz Türk, Hyundai Assan, MAN Türkiye, Oyak Renault, and Türk Traktör. In 2024, Turkey ranked twelfth worldwide among passenger car producers, fourth in Europe, and second in Europe for commercial vehicle production.

The automotive sector makes an impor­tant contribution to Turkey’s economic growth by stimulating demand in numerous upstream industries. Similar to Ger­many, it creates well-paid jobs, which has a positive impact on Turkey’s overall pur­chas­ing power. More than 56,000 people are employed directly in the automotive industry, and over 550,000 work in up­stream and downstream sectors. Industries such as metallurgy, plastics processing, elec­tronics, and logistics are developing in parallel with the growth of the automotive sector. Companies in this sector are invest­ing in technological innovation – there are 167 research and development centres nationwide – thereby strengthening the country’s technological infrastructure and innovative capacity in a sustainable way.

At the same time, the automotive industry is one of Turkey’s most important export sectors and is contributing towards reducing the country’s high trade deficit. According to the Automotive Industry Exporters’ Asso­ciation (OİB), automobile exports reached a volume of US$36.65 billion in 2024, an increase of 6 per cent compared with the previous year. The auto­motive sector thus accounted for 17.3 per cent of total Turkish exports; for almost two decades it has held the top position in Turkey’s export statistics. Almost two-thirds of Turkey’s automobile exports went to the EU in 2024, which is the largest market for Turkish vehicles and components. Thirteen per cent of Turkish automotive exports were destined for Ger­many, making it the single largest importing country (see Table, page 3).

The deeper integration of the Turkish automotive industry into the EU market – particularly the supply chains of the EU and Germany – stems from the Customs Union. Turkey strengthens the international com­petitiveness of the German automotive industry in several ways: Turkish suppliers deliver components reliably and cost-effec­tively, while the country offers competitive production conditions; and, as a logistics hub, it facilitates access to markets of inter­est to the German automotive industry, for example in Africa.

Challenges and stagnation

Nevertheless, the Turkish automotive indus­try faces three challenges.

Economic challenges: Inflation has, on the one hand, increased domestic demand for cars, partly because more consumers now view the purchase of a vehicle as an invest­ment. At the same time, the volatility of the national currency, high consumer taxes, and the rise in the corporate tax rate from 25 to 30 per cent are dampening both in­vestment appetite and consumer confidence in Turkey. A closer look reveals that indus­try profits are declining, while competitiveness and productivity are decreasing, partly due to rising production, transport, and distribution costs. The stagnation trend in the automotive sector is also reflected in the sharp drop in after-sales revenues.

Political, legal, and environmental challenges: The Turkish automotive industry is bur­dened by EU environmental regulations, particularly stricter CO₂ limits. These re­quire manufacturers to adapt their produc­tion processes and range of available models, which necessitates substantial investment in low-emission technologies. The sector must therefore invest in more environmentally friendly production methods, alter­native drive systems such as e-mobility, and circular economy concepts. The EU’s scheduled ban on the sale of new cars with internal combustion engines from 2035 is creating significant planning uncertainty. As a result, the demand for conventionally powered vehicles could decline consider­ably.

Additional uncertainties are emerging due to the political climate in Turkey. Repressive measures aimed at consolidating the regime – as in the case of the arrest of Istanbul’s mayor, Ekrem İmamoğlu – can undermine market confidence, trigger capital outflows, and weaken the lira.

Technological challenges: The shift towards electric powertrains is forcing the Turkish automotive industry to invest more heavily in the research, development, and production of electric vehicles, as well as in autono­mous mobility, digitalisation, and connected systems. Experts warn that, otherwise, Turkey could be reduced to the role of an assembly location. New regulatory require­ments such as the EU Battery Passport could create additional obstacles. If, for example, battery cells, inverters, and software are only assembled in Turkey, there is the risk of a regression to low-value creation, limit­ing the Turkish automotive industry’s role in global production chains to basic manu­facturing.

Adapting to a new technological and geopolitical reality

In cooperation with car manufacturers and suppliers, the Turkish government is pur­suing the goal of strengthening the inter­national competitiveness of its automotive industry. The main objective is to expand its market presence in Europe and to posi­tion Turkey strategically as a leading location for e-mobility – for instance, by specifically attracting foreign investors to the country. The strategic reorientation also includes building independent industrial capabilities and further developing the national electric vehicle brand, Togg, which made its international debut in September 2025 when it entered the German market. In doing so, Turkey is increasingly positioning the country as a self-confident indus­trial player that no longer wishes to see its role limited to that of a supplier or assem­bly location.

At the centre of this strategy is the delib­erate recruitment of manufacturers from non-Western countries as well. In this regard, the agreement with the Chinese electric vehicle manufacturer BYD has drawn par­ticular attention: The company is establishing a manufacturing plant in Turkey – a significant step towards strengthening the country’s position as a production hub for e-mobility.

Working in favour of the Turkish automotive industry is the fact that the Turkish brand Togg has managed to hold its ground, despite the market entry of BYD and Tesla: It maintained its high sales figures in 2024 and remains a key player in the electric vehicle market, where there has been a no­ticeable uptrend in general, further under­scoring the structural transformation of the industry.

In 2024, total sales in Turkey were as follows: By far the largest market share was held by petrol-powered vehicles at 60.1 per cent. However, plug-in hybrids (with electri­cally assisted combustion engines) recorded the strongest growth, with their market share rising to 18.8 per cent, placing them for the first time in second place in the powertrain ranking. Diesel vehicles con­tinued to lose importance, with their mar­ket share falling to 9.8 per cent. Sales of electric vehicles surged compared to 2023, from 72,179 to 105,315 units. As a result, electric vehicles surpassed the 10 per cent threshold for the first time, reaching a mar­ket share of 10.7 per cent. The most in-demand model was the Togg T10X, the first domestically produced electric vehicle, with 30,094 units sold. In second place was the Tesla Model Y with 11,534 units, while the BYD Atto 3 ranked eighth with 2,252 vehicles sold.

E-mobility in Turkey is strongly promoted through tax incentives. In particular, regu­lations under the Special Consumption Tax (ÖTV) have created incentives for the pro­duction and import of electric vehicles. As a result, numerous manufacturers began importing models that were subject to the reduced tax rate of 10 per cent – vehicles with a power output below 160 kW. This regulation has facilitated market access for affordable electric vehicles: 81 per cent of those sold in 2024 fell into this performance category.

Hybrid vehicles are also benefiting from tax incentives, which have noticeably increased their market share. In addition, trade policy measures have been implemented: On 31 December 2024, the Turkish government decided to raise the additional tariff on vehicles produced in China from 40 to 50 per cent. This measure, effective from 2025, is aimed at both protecting industrial policy and controlling market players.

Economic advantages and disadvantages

Economic experts see real opportunities with the market entry of Chinese car manu­facturers in Turkey. For example, the ex­pansion of charging and service networks could be accelerated, which would also benefit the national brand, Togg. Critics, however, warn that increasing economic integration with Chinese companies could intensify competition, displace domestic manufacturers, and foster strategic depend­encies. Nevertheless, not all of these con­cerns can be substantiated by the current market structure.

Firstly, the Turkish automotive market is diversified, both in terms of supply and demand. Secondly, the market share of Chinese brands remains limited. Although BYD drew attention by selling 6,591 vehicles in the final 32 days of 2024, other manufac­turers such as Neta were forced to withdraw from the Turkish market due to low sales and higher tariffs. Chery ranked fifth among the best-selling brands in 2024, yet its sales declined as a result of the new tariffs. At the end of 2024, as mentioned above, the Turkish government raised the additional tariff on Chinese vehicles from 40 to 50 per cent to protect domestic production.

The Turkish automotive industry would only face a substantial threat from Chinese manufacturers if tariff barriers were signifi­cantly reduced or removed. In such a sce­nario, Chinese producers could quickly expand their market shares at the expense of domestic manufacturers such as Togg. To remain competitive under these conditions, Togg would continue to rely on state sup­port and regulatory assistance.

Turkish car manufacturers and suppliers expect that the planned BYD production facility, once operational, will promote tech­nology transfer, strengthen local value creation, and further diversify Turkey’s inte­gration into global supply chains, par­ticularly in e-mobility. Collaboration in the form of joint ventures in battery production appears especially promising, as Chinese manufacturers hold a leading global posi­tion in key technologies such as battery cells, power electronics, and solar modules. This is likely to notably increase competitive pressure on the European automotive industry – not only globally, but also with­in the EU single market, to which Turkey has access through the Customs Union.

At the same time, cooperation with China holds fundamental risks, such as a deepening dependence on Chinese tech­nology and an increase in the trade deficit, not to mention existing geopolitical ten­sions. Should the trade conflict between China, the EU, and the United States esca­late, this could lead to restrictions that impact the Turkish automotive sector.

Security policy consequences

It cannot be ruled out that the conflict between Washington and Beijing in the field of digitally connected vehicles will intensify. In this case, close cooperation between the Turkish and Chinese auto­motive industries could lead to tensions in Turkey’s relations with the EU and the United States. The US government is already considering a ban on importing vehicles from China and other countries deemed security risks. This is justified on the grounds of national security interests, which could be threatened by electric vehicles. Certain electric vehicles today are far more than just a means of transport: They are highly connected IT systems. They feature tracking and data collection capa­bil­ities, making them politically and strategically relevant – both as potential targets for cyberattacks and espionage, and as a medium for surveillance.

Mass surveillance: Digitally connected vehicles can collect extensive personal data, including driving behaviour, movement patterns, residential and work locations, as well as business and private contacts. In authoritarian states such as China, the use of such data is not subject to independent oversight. Instead, it is evaluated by the state – for example to monitor individuals living abroad or to deliberately influence political, economic, or societal actors.

Such access to data entails significant risks, especially in countries with weak rule-of-law protections, like Turkey. The ability to create digital shadow profiles over a long period would threaten not only the privacy of individual users but also collec­tive security. The possibility that Chinese authorities could gain access to sensitive security or military data through vehicle technologies deployed in Turkey cannot be ruled out.

Espionage: Digitally connected vehicles – equipped with microphones, cameras, and sensors – have the capability to collect information covertly. They can track loca­tions, movement patterns, and even conversations – thus losing their function as protected spaces for sensitive communication, whether in business, political, or diplomatic contexts. In the case of close technological cooperation with China, there is a risk that this infrastructure could be used for state-directed espionage. The deployment of Chinese vehicle technologies in Turkey would not only endanger national security; if Chinese actors were to gain access to security-relevant information through such systems, the consequences could ex­tend to the North Atlantic Treaty Organiza­tion (NATO), the EU, and the United States.

Sabotage: The ability to remotely control modern electric vehicles enables the pos­si­bility of digital sabotage. Cyberattacks could deliberately disable numerous vehicles in urban areas simultaneously – with severe consequences for traffic flow, emergency services, and security authorities. Attacks on the energy infrastructure would be par­ticularly harmful: If charging operations for thousands of vehicles are coordinated to start or stop simultaneously, it could desta­bilise the power grid. Additional risks arise from bidirectional charging, whereby vehicles feed electricity back into the grid; this could serve as a potential entry point to disrupt the power supply and other critical infrastructure.

It is conceivable that this potential for sabotage could be used as a strategic means of exerting pressure. Beijing could be em­powered to exert political or economic influence over Ankara through technical access points, for example in multilateral bodies or security policy decision-making processes. These risks affect not only Tur­key’s national security but also carry stra­tegic implications for NATO as an organisation as well as Turkey’s partners in NATO.