Ali Bilaloğlu, the chairman of the Automotive Distributors’ Association (ODD), has welcomed the Central Bank’s latest decision to further cut its interest rates, saying this move may reduce consumers’ borrowing costs and boost vehicle sales.
The Turkish Central Bank on Sept. 12 lowered its policy rate (one-week repo rate) by 325 basis points to 16.5 percent from 19.75 percent.
“This [the Central Bank’s rate cut] was a step in the right direction. Monthly borrowing costs of consumers may ease toward 1 percent. There is no doubt, this will have a positive impact on first-hand car sales,” Bilaloğlu said.
He cited three factors affecting vehicle sales: The price of vehicles, consumer confidence and financing conditions.
“Foreign exchange rates and taxes are part of the prices. The consumer financing conditions are directly related with banks’ appetite for lending loans and interest rates,” Bilaloğlu said.
He said that their calculations suggest that when the interest rate on car loans is around one percent, the automotive market expands.
Following the Central Bank’s rate cut, they are expecting higher sales in the automotive market, Bilaoğlu added.
“Forecasts for this year have been revised upwards by 50 percent in the wake of the rate cut. The ODD’s latest estimate for vehicles sales for 2019 stood at 350,000 units. The ODD has not yet collected new estimates from its members. We are currently working on this.
“However, the rate cut can potentially push vehicle sales up to 400,000 units,” he said.
Earlier in September, Bilaloğlu suggested that with a boost from lower interest rates, local carmakers may see better sales in the last four months of the year.
“I am expecting car sales to exceed the average sales seen in September-December period of the previous years, thanks to the decline in interest rates and other factors,” he said on Sept. 17.
The automotive market narrowed nearly 46 percent year-on-year in the January-August period as passenger car and light commercial vehicle sales totaled 239,317 units.
Some 193,320 passenger cars were sold, dropping 43.94 percent compared to the first eight months of 2018.
The light commercial vehicle market contracted 51.86 percent to 45,997 units.
Some 621,000 automobiles and light commercial vehicles were sold last year, down from 956,194 in 2017.
Prominent automotive manufacturers including Fiat, Ford, Honda, Hyundai, Mercedes, Renault, and Toyota have manufacturing operations in Turkey, which is among the world’s top auto sale markets.
In Turkey, a total of 620,937 automobiles and light commercial vehicles were sold last year, down from 956,194 in 2017.
Hurriyet Daily News