Vehicle parts and service suppliers will enjoy stable growth in the Turkish automotive aftermarket, but they must face the risk of financial volatility and the lack of consumer awareness of how to maintain their automobiles.
Those are among the main conclusions of Frost & Sullivan’s latest research, “Strategic Analysis of the Turkish Automotive Aftermarket.”
Total manufacturer-level parts revenue will grow from an estimated $4.51 billion in 2014 to $6.35 billion in 2021, a compound annual growth rate of 5.0 percent. For comparison, the U.S. aftermarket is valued at $86.56 billion and growing at 2.7 percent annually.
European parts and service groups have captured much of the independent aftermarket. France-based Autodistribution, GROUPAUTO and Germany-based TEMOT are the largest WD groups operating in Turkey. Bosch Car Service, Turkey-based AUTO KING, and U.K.-based Speedy are the largest service chains.
Turkey has several favorable demand characteristics to support the growth of the automotive aftermarket industry.
First, total vehicles in operation is growing from about 13.0 million last year to a forecasted 15.8 million by 2021, an increase of more than 20 percent over a seven year period. Average vehicle age is at 11-plus years, with one in five older than 20. This has prompted government action to incentivize new vehicle sales, but offers ample opportunities for parts and service suppliers to maintain these older models.
Fleets account for up to one-third of all parts and service revenue, which supports the aftermarket since these vehicles are frequently maintained. High collision rates due to poor roads means there is a large and growing market for paint and body services. Average annual use, or the total number of kilometers traveled, is also expected to increase as infrastructure improves and drivers are able to get from place to place easier.
Turkey also aligns with European regulatory schemes that contain block exemptions allowing independent suppliers to service under-warranty vehicles, as well as, right-to-repair type protections.
While most of the opportunity lies in Western Turkey, including Istanbul, the aftermarket is also poised for growth in the more sparsely populated East. Many used vehicles from Western Turkey are being sold to new owners in Eastern Turkey.
However, an increase in the special consumption tax on new vehicles, fluctuation of the Turkish lira, and government loan limitations are likely to threaten this positive growth environment. New vehicle sales fell by more than 20 percent last year as interest rates rose sharply.
In addition, there is also the challenge of educating consumers and training installers. Most independent repair facilities do not have access to the tools and programs needed to service newer vehicles, so OEMs and dealerships are in the best position to benefit from industry growth. Renault, Ford and Fiat have the most sales and service locations in Turkey.
Turkey is the gateway from Europe into Asia, where industry growth rates are much higher. Despite the uncertain market outlook, more and more parts and service suppliers are looking at Turkey as a way to bridge the two continents and expand into more lucrative markets.
Editor's note: Stephen Spivey is the program manager for Frost & Sullivan’s Automotive & Transportation Global Aftermarket research practice. He focuses on monitoring and analyzing emerging trends, technologies and market behavior in the global automotive aftermarket. For more information on Frost & Sullivan’s Automotive & Transportation research, contact Clarissa Castaneda, Corporate Communications, at [email protected].
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