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China sues Turkey for raising taxes on Chinese cars by 40%, easing investment restrictions and allowing Chinese car companies to find a "new way out"
Text / Reporter Ma Jingze
A spokesperson for China's Ministry of Commerce answered a reporter's question on October 8 about China's complaint against Turkey at the WTO for import restrictions on electric vehicles and other vehicles.
(Source: Turkey Embassy in China Weibo)
A spokesman for the Ministry of Commerce said that China submitted a request to the Turkish side for consultation at the WTO on the measures to impose tariffs and import licenses on Turkey's electric vehicles and other vehicles. Turkey's imposition of a 40 percent tariff on electric vehicles and other vehicles imported from China, as well as restrictions on import licenses, are typical protectionist practices with discriminatory measures that violate WTO rules. We urge Turkey to abide by its relevant WTO commitments and to immediately correct its erroneous practices.
Aggressive tax hikes will not help business cooperation
Previously, in March 2023, Turkey announced an additional 40% additional tariff on electric vehicles imported from China. On June 8 this year, Turkey announced that it would extend the 40% surcharge to gasoline and hybrid passenger cars.
It is reported that Turkey is the seventh largest car manufacturer in Europe. Since the 70s of the 20th century, Turkey's automobile industry has continued to develop rapidly, becoming an important part of the national economy and the main source of export foreign exchange.
According to the data of the Turkey Exporters Conference (TIM), in January ~ September 2024, Turkey's automobile exports increased by 5.3% year-on-year to 26.933 billion US dollars, accounting for 16.2% of total exports. Among them, the export value of the automobile industry in September increased by 20.9% year-on-year to 3.406 billion US dollars.
However, Turkey's automotive industry is mainly concentrated in the field of automobile manufacturing and processing, and there are few independent brands, and many European car brands have set up subsidiaries and factories in Turkey, such as TOFAS Automobile, the second largest automobile manufacturer in Turkey, which is a joint venture between Italy car brand Fiat and Turkey's Koc; The Otosan plant in Turkey is Ford's largest commercial vehicle plant in Europe.
From the perspective of sales of Turkey car brands, European mainstream car brands such as Fiat and Renault have a significantly higher market share in Turkey.
(Source: DE Future in the Rearview Mirror)
In recent years, Turkey has strongly supported the development of local car brands. In the field of electric vehicles, a consortium of five Turkey companies founded Turkey's local automaker Togg in 2018 and officially launched its first homegrown electric vehicle in April 2023.
Turkey President Recep Tayyip Erdogan said Togg is a symbol of Turkey's technological progress, economic development and global reputation.
Togg has also indirectly boosted Turkey's "tram fever". According to data from the Turkey Automobile Distributors and Mobility Association (ODMD), in January ~ August this year, the sales of all-electric vehicles in Turkey soared by 94.7% to 47,032 units, and the proportion of electric vehicles in total sales also increased from 4.1% in the same period last year to 7.8%. According to industry data, in the first eight months of this year, Togg ranked first in the domestic electric vehicle market with sales of nearly 15,000 units.
Regarding the increase in tariffs on imported cars from China, Turkey's trade ministry said that the additional tariffs were imposed to increase and protect the declining share of domestic production and encourage domestic investment and production.
However, some industry insiders pointed out that after Turkey imposed additional tariffs on Chinese automobiles, Turkey's auto tariffs on China have reached 50%, which not only damages the economic and trade relations between China and Turkey, but also cannot truly solve the problem of Turkey's weak domestic electric vehicle industry.
China's car chain Turkey needs to guard against risks
While raising tariffs on Chinese automobiles, the Turkey government has also "opened its mouth" in terms of investment by foreign automakers, which has also made investing in Turkey and building factories the choice of many Chinese automakers.
On July 5, Turkey published a presidential decree on the Decision on Amending Additional Tariffs on Imported Products, which stipulates that no additional taxes and fees will be levied on the import of automobiles within the scope of investment incentive policies, with immediate effect. According to Turkey media reports, according to the latest regulations, car manufacturers who invest and set up factories in Turkey will enjoy investment incentives and will not have to pay the previously stipulated 40% additional tariff, but only need to pay 10% tariff.
BYD's "big move" followed. On July 8, local time, BYD signed an investment and construction agreement with the Ministry of Industry and Technology of Turkey, according to which BYD will invest about 1 billion US dollars (more than 7 billion yuan) in Turkey to build a factory and R&D center with an annual production capacity of 150,000 vehicles, which is scheduled to be put into operation by the end of 2026.
(Source: BYD official website)
In addition, BYD's establishment of a factory in Turkey is not only to serve the local market in Turkey, but more for the purpose of "building a supply chain for exports to Europe". Industry insiders believe that Turkey has a good automotive industry foundation and parts industry chain, with a total of 162 R&D and design centers for automobile manufacturers and suppliers as of 2023. In addition, with the adoption of the final draft of the EU electric vehicle countervailing case, building a factory in Turkey is also more advantageous in terms of policy, which undoubtedly provides an opportunity for BYD to enter the European market.
In addition to BYD, Atmo Group, a representative of Chinese car manufacturer SWM Swy, also announced in July that the company had applied to build a car manufacturing plant in Turkey. Dongfeng Xiaokang, Chery, MG and other brands have also expressed their intention to invest in the country.
However, for many unguarded Chinese auto companies, it is still necessary to pay close attention to the policy risks of countries such as Turkey, and to hollow out the upstream of the value chain by forcing Chinese enterprises to transfer and localize core technologies such as new energy vehicles, thereby replacing China's supply chain.