Turkish Automotive Industry: Navigating a Challenging Period of Demand and Profitability
BS Finance - The Turkish automotive market is divided into two different halves regarding expectations for 2025. According to the latest report published by HSBC, resilient sales in 2024 will come under pressure in the first half of 2025 due to interest rates and weakness in the consumer environment.
Challenging Start, Better Second Half HSBC analysts predict a 5% contraction in the Turkish automotive market for 2025. In the first half of the year, a more significant decline in sales is expected due to high base effects and tight monetary policies, while in the second half of the year, possible interest rate cuts might support consumer demand. The report states that reliance on credit remained low due to strong cash purchases in 2023 and 2024, but the effects of interest rate cuts will be delayed.
Ford Otosan (FROTO (IS:FROTO)) Stands Out The report positions Ford Otosan favorably due to its strong export capacity. HSBC forecasts that the company will increase its export volume with the new Volkswagen 1-ton model and that 85% of total sales will come from abroad. The "BUY" recommendation for Ford Otosan is maintained, with a target price set at TRY 1,370.
Cautious Outlook for Tofaş (IS:TOASO) and Doğuş Otomotiv Tofaş (TOASO) plans to increase its exports with the new LCV model "K0" in 2025; however, the challenging competitive conditions in the domestic market and declining tax advantages are posing pressure. Uncertainties regarding the Stellantis-Turkey merger were also not included in the valuation. The target price has been updated to TRY 220, while the "HOLD" rating remains unchanged.
Doğuş Otomotiv (DOAS (IS:DOAS)) is expected to outperform the market in 2024, yet faces margin pressure. HSBC anticipates that the company will support its sales volume with a strong portfolio, but profitability will remain limited. The target price has been revised to TRY 240, while the "HOLD" rating is maintained.
Türk Traktör: Weak Demand to Continue For Türk Traktör (TTRAK (IS:TTRAK)), a 5% contraction in domestic demand is expected in 2025. The report notes that the impact of subsidized loan rates from Ziraat Bank has decreased, emphasizing that competition from low-cost Tier-3 tractors could increase. The target price has been updated to TRY 825.