BYD builds electric car factory in Turkey

The world’s largest manufacturer of electric vehicles is building a new factory in the country on the Bosporus. For President Erdogan, the establishment is a major success.

For the first time in 27 years, a foreign car company is building a new factory in Turkey. Chinese electric vehicle manufacturer BYD signed an agreement with the Turkish Ministry of Industry this week for an investment in the order of one billion dollars.

According to Minister Mehmet Fatih Kacir, the new production facility will have an annual capacity of 150,000 vehicles and create 5,000 jobs. Production is scheduled to begin at the end of 2026.

Export to Europe

BYD, the world’s largest manufacturer of electric vehicles, is pushing into the European market with some aggression, which is evident not least from its large advertising presence at the European Football Championship. The planned factory in Turkey can make a contribution to this.

The EU has imposed punitive tariffs on electric cars from China to offset competitive advantages through Chinese subsidies. This does not apply to cars manufactured in Turkey due to the customs agreement with the EU.

The head of BYD’s European business recently told the Financial Times that bringing cars from China to Europe is not a long-term solution. The future lies in local production. BYD is also building a factory in Hungary.

In addition to exports to Europe, Turkey is also an interesting market for the Chinese company. In 2023, sales of electric vehicles in this country increased eightfold compared to the previous year, to almost 70,000 units.

Long-awaited success story

For Turkey, the Chinese investment commitment is grist to its own mill on many levels. It is undisputed among international companies operating here that the emerging country on the Bosporus is an attractive location and has great potential. However, the general view of the local economy is dominated by negative headlines, especially about the far too high inflation. In June, the figure was 71.6 percent.

Since the economic policy turnaround under the new finance minister Mehmet Simsek, which among other things led to a drastic increase in interest rates, there have been active efforts to regain lost confidence. After years of monetary policy experiments, Turkey is urgently dependent on foreign investment.

In addition to the young and dynamic population and the large domestic market, the focus is also on the geographical location as a bridge between Asia and Europe.

Initially, the focus was on so-called near-shoring: the strategy of Western companies to reduce their dependence on China by setting up production facilities closer to their parent company. The BYD example shows, however, that Turkey is also attractive for the opposite trend: the expansion of Chinese companies into Europe.

Erdogan refrains from criticising China

The fact that a car company is making a spectacular major investment in Turkey is particularly satisfying for local business development. In October 2019, Volkswagen put plans to build a plant in Manisa on hold. The move was justified by the military intervention in Syria, for which Ankara was heavily criticized in the West.

Volkswagen later stopped the project altogether. Although operational reasons were also decisive, the episode was seen as a prime example of how Erdogan’s confrontational approach towards his Western partners can also have economic consequences.

Against this background, it is noticeable that Ankara is trying to maintain the smoothest possible relationship with China. For a long time, Turkey was the most vehement critic of Beijing’s Uighur policy. Solidarity with other Turkic peoples is very strong, especially in the nationalist milieu in Turkey. But Erdogan has hardly commented on the issue for several years.

BYD’s plant will most likely be built on the site that was earmarked for Volkswagen in Manisa, an industrial city in the west of the country. One of the arguments in favor of the location is its proximity to the port of Izmir. The center of the Turkish automobile industry is located a little further north in the Marmara region, especially in the area around Bursa. Around 1.5 million vehicles are manufactured in Turkey every year.

Türkiye builds its own electric vehicles

Ankara also hopes that the Chinese industry leader’s settlement will provide technological impetus. President Erdogan is striving for his country to become an independent power pole that shapes its own affairs and does not have to take others into consideration. Building up local expertise in future technologies is a component of this strategy.

The development of its own drone industry has been particularly successful. But the country also doesn’t want to miss the boat when it comes to electromobility. Since 2022, the Turkish company Togg, in which the state also has a stake, has been mass-producing domestic electric cars.

The fact that a much more competitive competitor is now being brought into the country may seem somewhat contradictory. After all, Turkey only introduced tariffs of 40 percent on all Chinese cars a few weeks ago.

However, there was already a clause at the time that the regulation did not apply to manufacturers that produce in Turkey. A few days ago, a senior representative of Erdogan’s AK Party also announced that Togg was in talks with China’s Guangzhou Automobile Group Co. (GAC) about a joint venture. The BYD plant will also include a research department.

For now, the technology is to be brought into the country, and not just from China. At a meeting in September, Erdogan suggested to businessman Elon Musk that he build a Tesla factory in Turkey. The two men know each other well. Musk’s space company Space X has already transported several Turkish satellites into space. The last launch was on Monday.

By Editor

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