ECONOMY

Report: Mergers, acquisitions in Turkish automotive industry to increase

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Mergers and acquisitions in the Turkish automotive industry, especially in terms of supplier companies, are expected to increase in the coming years, according to a report by international audit and tax advisory company KPMG.

The report elaborated on the developments experienced in the Turkish automotive industry over recent years and included expectations for 2019.

Examining the acquisitions and mergers that have taken place in the Turkish automotive industry since 2015, the report highlighted that the supply industry will be the center of attention for foreign investors throughout the year.

KPMG Turkey Advisory Head Hande Şenova said the automotive industry, which has been through a tough year due to high exchange rates, high borrowing costs and high input costs, offers significant opportunities for investors.

"Companies with high export rates, relatively low exchange rate risks and that can protect their profitability are on the radar of strategic and financial investors. In addition, we think that important opportunities will develop in the coming period for investors who follow financially troubled companies that could not borrow from the market and have a need for financing," she said.

According to the report, the majority of the 23 mergers and acquisitions transactions seen in the automotive sector in Turkey between 2015 and 2018 took place in the supply industry.

At the same time, it was observed that foreign investors entering the Turkish market are targeting to reach leading manufacturers that strengthen their position in Turkish and European markets.

Recently, the automotive sector, which has been going through a comprehensive technological transformation, has become the center of research and development (R&D) activities with the entrance of technology companies to the automotive sector, according to the report. The report also stated that companies that want to keep up with the change in the sector often try to establish partnerships with technology companies.

The sector hit an all-time high in 2018, raising its exports by 11 percent to $31.6 billion. It took the lead for the 13th time in a row in annual exports. It constituted 19 percent of the total exports and 6 percent of total employment.

The domestic automobile market contracted last year in Turkey, but this slowdown did not stop the country's strong sales performance compared to European nations. Turkey overtook 23 countries and ranked eighth in Europe in terms of automobile sales in the continent, according to the "2018 European Automotive Market Evaluation" report prepared by the Automotive Distributors Association (ODD) and based on the data of the European Automobile Manufacturers Association (ACEA).

With a total of 486,321 automobiles sold, Turkey outperformed the Netherlands, Sweden and Austria in the list of Europe's most automobile sales last year. According to December data, Turkey ranked sixth, selling 60,843 automobiles, following Germany, France, the U.K., Italy and Spain.

When foreign capital investments made in the Turkish automotive industry are examined, the report said the vast majority of them on unit base came from the U.S., European countries, Japan and India.

In the field of tractors and agricultural machinery, India-based Mahindra's investments come to the fore. The report also projects that due to the size of the domestic market and tax incentives for products produced within Turkey, India's investments in the country will continue in the upcoming period.

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