Chery to Produce cars in Turkey
Published on April 30, 2011 by Tycho de Feijter
ISTANBUL – Chinese automotive giant Chery might be a newcomer to Turkey, but its fortunes are posed to change if the new half-billion-dollar local car-making plant is completed.
Mermerler Otomotiv, the Turkish company which brought Chery to Turkey back in February 2008, has prepared all preliminary work for the establishment of such a plant in Adapazari in northwest Turkey.
In an interview with Xinhua, Mermerler Otomotiv Deputy General Manager Aydin Akyol explained the progress of the factory and why it was essential to Chery’s future in Turkey.
Importing directly from China for over three years, there are more than 6,000 Chery vehicles on Turkish roads now.
Akyol said there should have been more, but the economic crisis made gaining market share difficult, adding that currently, Chery is 21st out of around 50 automotive brands in Turkey.
According to Akyol, one of the biggest obstacles in Turkey has been the lack of diesel engines in Chery cars. Without a strong demand back home for diesel, China does not specialize in that market.
But high fuel prices in Turkey have made the diesel engine the most popular one, with 51-52 percent of cars sold in 2010 being diesel, and 64 percent market expected in 2011.
“If we could put diesel in them, we’d be in the top 10 really fast,” added Akyol.
But the biggest obstacle remains price. With Chery’s going for between 20,000 and 45,000 Turkish Lira ($30,400 and $68,400) right now, Akyol said that China is selling Turkey their cars for a higher price than feasibility studies suggest.
Akyol estimated that prices will go down by as much as 27-28 percent with the completion of the factory, saving money on everything from customs to transportation to insurance.
So Mermerler began conducting feasibility studies in 12 locations, factors such as transportation cost, proximity to secondary supporting industries, location of skilled labor populations were all found to be ideal in the town of Karasu in Adapazari district.
All that is left is the final paperwork, Akyol said, adding “the preliminary protocols are ready, the money is ready, the land is ready, even all the factory equipment from paint to molds to presses are ready.”
Even all the relevant government incentive packages, from tax breaks to subsidies, have been applied for. Akyol praised the government’s cooperation in the venture, saying they have given the best possible incentives for such a venture.
“The Turkish government, particularly the prime minister, gives a very high priority to our investment, to all investments from China really,” he said.
But some bureaucratic obstacles remain: some basic, such as re- designation of land located in the plot, some more complex, such as asking for an Environmental Impact Analysis before preparing the deed, and asking for the deed before giving the Environmental Impact Analysis.
Initially planning to have begun factory construction before the elections in June, these final complications have delayed the project.
But once construction does begin, it is expected to be completed in one year and six months, and the first prototype should be out six months after that.
The $450 million project, currently planned as a joint project between Chery and Mermerler, will produce 20,000-25,000 vehicles initially, both passenger and light commercial vehicles, but will have a maximum capacity of up to 100,000.
Due to high demand, Akyol said the factory will also be producing diesel engines. While gasoline engines will still be imported from China, every other part of a Chery, including diesel engines, will be produced here.
Akyol even mentioned they hope to make their own original model at the factory, most likely an SUV, the most popular Chery vehicle in Turkey.
But electric cars still need some more time. Chery currently has four models of electric cars and two hybrids, but such vehicles are not yet popular in Turkey.
Akyol said the main reasons for this are the risk of running out of energy and the lack of infrastructure for recharge points. “It will take another 8-10 years before electric cars can be taken seriously here,” he said, “and we are just trying to meet the demands of the current market.”
But even more than capturing the Turkish market, the factory is about capturing the European one, with an estimated 60-65 percent of production to go for export.
Meanwhile, Turkey provides a launching pad into Europe, according to Akyol. With low costs, good logistical opportunities, and many secondary supporting industries nearby, these vehicles can easily start appearing on European roads.
Akyol added that Europe sees Turkey as a testing ground for automotive brands, saying “a car tested in the Turkish market will be successful in Europe.”