Turkey hikes tariffs on Chinese cars to boost investment

peterolthof/Flickr

• Move will anger Beijing
• Gasoline and hybrid imports hit
• Tariffs rise to 50 percent

Turkey has accelerated its policy of targeted tariffs on Chinese vehicles, increasing levies on gasoline and hybrid model imports. 

Industry insiders believe the move is designed to protect local manufacturers and encourage Chinese investors to set up in the country, even though it is likely to further anger Beijing. 

The Ankara government announced that tariffs on imported Chinese conventional and hybrid vehicles would rise from 40 to 50 percent as of January 1.

This would be combined with the standard 10 percent customs duty, taking the total tax charged to 60 percent of the sales price. 

Chinese automotive producer BYD was given an exemption from the new levy, a move that may point to the driving force behind the increase. 

The company is in the process of investing $1 billion in developing a production facility for electric vehicles (EVs) in the province of Manisa in Turkey’s Aegean region, with a capacity of 150,000 vehicles annually.

Additional tariffs

Last year the European Union increased tariffs on Chinese-built EVs to more than 45 percent. Brussels said at the time that China’s spare production capacity of 3 million EVs per year was twice the size of the EU market. 

The United States and Canada had already imposed 100 percent tariffs on Chinese EV imports.  

Still, the additional hike in Turkey aims at encouraging Chinese brands to launch production in the country, Anıl Şentürk, the chair of the automotive sector committee of the Istanbul Chamber of Commerce (ITO), told AGBI. 

The policy has already borne fruit with BYD, and another Chinese marque Chery, which is involved in talks over locating partial production capacity to Turkey, even though an agreement has yet to be struck. 

“Even if the nature or details of these investment deals might be debated, the decision of increased tariffs has paid off in attracting investment,” said Şentürk. 

The higher tariffs on gasoline and hybrid vehicles will also promote the sales of EVs, he said, in turn fuelling demand for the locally produced TOGG, developed by a consortium of Turkish firms with state backing.

“Certainly, one of the reasons behind this decision is to keep TOGG in an advantageous position in the market and sustain its sales numbers,” said Şentürk.

While the increased tariffs may see Chinese automotive investments rise, it is unlikely Beijing will appreciate the pressure being applied by Ankara. 

Targeted tariffs have already incurred China’s ire. In October, the Chinese government submitted a trade dispute complaint with the World Trade Organisation in response to levies imposed on the import of EVs, which Ankara increased to 40 percent in June. 

The increase also comes as production and sales of locally made vehicles continues to fall. Imports accounted for 72 percent of all car sales in the 11 months to November, according to data from the Turkish Automotive Industry Association in December. 

Overall domestic sales increased by less than 1 percent in the first 11 months of last year. Locally made cars fell by 4 percent, compared to a 7 percent increase in the number of imported cars rolling off Turkey’s lots.