Critical Steps

Türkiye stands as an attractive production hub for both Chinese and European manufacturers. However, realizing this potential requires taking structural transformation steps.

In the first half of 2025, Türkiye’s automotive industry reached an export volume of 20 billion dollars, maintaining its leading position in the country’s foreign trade balance. The industry continues to increase its production capacity while redefining its global competitiveness through new investment decisions. The additional local production commitments from Chinese manufacturers and the Renault Group’s announcement of its second strategic model investment mark a new phase of capacity expansion on the supply side. However, this growth momentum carries the risk of being overshadowed by rising production costs and declining capacity utilization rates.

The production operations that SWM and JAC will initiate in the Eskişehir Organized Industrial Zone (OIZ) also reflect Chinese manufacturers’ ambitions to move beyond assembly-line production in Türkiye. Under the Urzat partnership established by ATMO Group and Urzema Holding, an initial production capacity of 20,000 vehicles is planned, with this number expected to reach 40,000 by 2029. By 2026, the localization rate in domestic production is projected to reach 30%, gradually exceeding 51% over time. This production model represents the first instance in Türkiye where supply chain integration will be implemented for China-origin vehicles.

Meanwhile, in the second phase of its 400-million-euro investment plan carried out in partnership with OYAK, the Renault Group announced that the Boreal model, positioned in the C-SUV segment, will be produced in Bursa starting in 2026. With this model, Renault is positioning Türkiye as a primary production hub for export markets outside Europe. High value-added features such as Google-supported multimedia systems, E-Tech hybrid engine technology, and large luggage capacity will push the limits of global engineering standards on Türkiye’s production lines. The company’s plan to produce four new models in Türkiye by 2027 indicates that the Bursa OYAK-Renault facilities will advance further in R&D, design, and industrial production capabilities.

Using Two-Thirds of Capacity Puts Pressure on Unit Costs

According to data from the Automotive Manufacturers Association (OSD), as the first half of this year concluded, total production remained parallel to last year’s level at 706,000 units — an important indicator of stability. However, passenger car production declined by 5% to 439,000 units, while the capacity utilization rate dropped to 67%.
Although the industry’s total production capacity has increased to 2.2 million units, operating at only two-thirds of that capacity continues to create pressure on unit costs.
OSD President Cengiz Eroldu highlighted that despite the current investment climate, Türkiye has become a more expensive production region compared to Eastern European countries, emphasizing that this loss of competitiveness has turned into a structural problem within the sector.

During this period, automotive exports increased by 8% in volume and 13% in value. While commercial vehicle exports grew by 32%, passenger car exports fell by 6% — a contrast worth noting.
Total exports reached 530,000 units, with $5.8 billion coming from passenger cars, bringing the sector’s overall export volume to $20 billion.
On the other hand, the share of locally produced vehicles in the domestic market declined to 29% for passenger cars and 20% for light commercial vehicles.
This negative trend in the domestic market indicates that, despite rising exports, there is no corresponding capacity growth on the production front.

Ultimately, Türkiye remains an attractive production hub for both Chinese and European manufacturers.
However, realizing this potential requires not only new investment decisions — which often come after long and challenging processes — but also structural transformation measures aimed at increasing operational efficiency and restoring competitiveness.
Even if the recovery forecasted by the OSD materializes in the second half of 2025, achieving sustainable long-term growth will depend on reducing production costs, increasing localization rates, and strengthening the share of domestic production in the internal market.

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