Karam Saeed‏‏

On 17 July 2024, BYD Auto signed an agreement with the Turkish Ministry of Industry and Technology to build a billion-dollar factory with an annual capacity of 150,000 cars. It also agreed to build a research and development center for mobility technologies; production is expected to begin in late 2026.Under this agreement, it seems that Chinese investment in the Turkish economy will be particularly significant during the coming period. This will give the struggling Turkish economy a significant boost and also provide an environment conducive to Turkey becoming a promising market for attracting other car companies. These agreements are the first of their kind and mark a turning point in bilateral relations between Turkey and China. They come at an important moment: While China is trying to strengthen its position as a global economic power through expanding the scope of its influence in the Middle East, Turkey is turnings eastwards due to ongoing disputes with Washington. Meanwhile, the EU has also continued to express reservations about Turkey’s potential EU membership, as some European leaders have suggested a special partnership with Turkey rather than full membership.Various ObjectivesChina’s interest in strengthening investments in the automobile sector in Turkey is part of its strategy to develop alliances with regional powers that possess the industrial infrastructure to enable Chinese entrepreneurship to expand throughout the global automotive sector. With the BYD deal, Beijing seeks to achieve various objectives, including the following:1. Utilize Turkey’s advantages as an emerging market: Turkey is an emerging market for Chinese investment, which grew to 2.8 billion USD in direct investments in 2023. Turkey also offers appealing competitive advantages to China, including advanced technology, cheap labor, competitive prices, and diverse consumers, which means that the Turkish market can accommodate all models of cars. For China, Turkey’s geographic location is also strategic. 2. Circumvent the import tariff crisis: Chinese automobile companies want to step up investments in Turkey in order to get around tariffs that Turkey imposed on imported Chinese cars. On 8 June 2024, Ankara decided to impose an additional 40 percent tariff on imported Chinese cars, and in 2023 had introduced additional tariffs on electric cars from China.3. Benefit from Turkey’s European ties: Chinese investments in the Turkish automobile market are connected to China’s efforts to make the most of Turkey’s pragmatic ties with key markets in the car industry, especially in Europe. Due to economic disputes and political tensions between China and Western countries, China has not been able to expand its influence into European markets. Beijing wants to utilize the tariff agreement between Turkey and European countries in order to get around European restrictions on car imports from China. This is particularly important with regard to exports from Chinese factories in Turkey which will be treated as Turkish products, thus enabling China to overcome obstacles including these tariffs. This strategic advantage makes Turkey an attractive site for Chinese car companies that want to expand their influence in European markets.4. Turkey as a global hub for automobile production: Turkey has become an attractive manufacturing hub for a broad array of global automobile companies, especially Ford, Fiat, Toyota, Hyundai, Renault, and Mercedes, among others. Estimates suggest that around 250 global car suppliers use Turkey as their production base, including 30 suppliers that rank among the top 100 global suppliers. It is also worth noting that Turkey had exported more than 1 million automobiles by the end of 2023 to dozens of foreign markets. It also came in second (after the UK) for automobile exports to European markets. This explains Chinese car companies’ interest in increasing their share of investments in Turkey. Additionally, Turkey’s vision aligns with China’s with regard to expanding involvement in electric car markets in the coming period.5. Neutralize pressure from Western rivals: Chinese car companies have been expanding their activity in Turkey while Western powers continue to try to obstruct Chinese growth in the automotive sector. On 14 May 2024, Washington stated that it would increase tariffs on imports of Chinese electric vehicles from 25 to 100 percent. The EU has taken similar steps to protect local electric car manufacturing. In light of this, the Turkish market offers an alternative catalyst for the Chinese automotive industry, and can help Beijing to absorb a significant portion of the negative repercussions of the decision to raise tariffs on cars that the West imports from China.Mutual Benefits BYD’s expansion in the Turkish market is expected to contribute to numerous positive outcomes in relations between Ankara and Beijing, including the following:1. Pave the way for a comprehensive strategic partnership: Chinese car companies are currently showing interest in pouring further investment into Turkish markets, even beyond the BYD agreement. There have been assurances that Chinese car company SWM could potentially expand investments in Turkey during the coming period. This new Chinese approach towards Turkey is likely to lead to a comprehensive strategic partnership between Ankara and Beijing.2. Support for Turkish electric car manufacturing: China is expected to support Turkey’s efforts to develop its electric car industry. This will occur through partnerships to build joint factories. Many assessments indicate that Chinese companies operating in Turkey could contribute to developing Turkish technology industries linked to automobile production, and China could play a role in sharing some of its expertise with its Turkish counterparts in this sector. Meanwhile, BYD’s investments will help push global automobile companies to ramp up their investments in Turkey. Turkey therefore has the capacity to become a regional hub for automobile supply chains, especially since some analyses suggest that car markets are shifting away from global supply chains in favor of regional ones.3. Turkey becomes a hub for Chinese cars: After signing the BYD agreement, Turkey is set to become a new hub for the production and sale of various models of Chinese cars, especially since there is significant openness to Chinese car models in the Turkish market. There are currently 12 different Chinese car models as of 2024, according to a report produced by the Turkish Automotive Distributors and Mobility Association (ODMD). Two Chinese-made electric cars—the BYD Atto 3 and MG4—were ranked third and fourth in top-selling electric cars in Turkey as of the end of February 2024.4. Developing Chinese-Turkish bilateral trade: Trade relations between China and Turkey have recently expanded significantly: The volume of bilateral trade reached 48 billion USD by the end of 2023. China is Turkey’s top trade partner in Asia. In light of the expanded agreements between Turkey and BYD that have been signed recently, it is likely that there will be steady growth in the volume of bilateral trade during the coming period, especially since Turkey is a promising new market for Chinese electric car sales and manufacturing and serves as Beijing’s gateway to Europe. Turkey is also aiming to benefit from Chinese technical expertise in developing its processes for the manufacture and sale of Turkish electric vehicles, which are in need of further support and ongoing upgrades.5. Coordinate joint agreements on regional issues: It is likely that Chinese car companies’ current and upcoming investments in Turkish markets will prompt the two countries to pursue expanded agreements and stronger coordination on regional issues to protect mutual interests. Turkey has appealing markets and competitive advantages for the Chinese automotive industry and needs to revive its economy through attracting further Chinese investment and expanding the scope of Chinese economic activity in Turkey. BYD’s investments reflect Beijing and Ankara’s hopes to secure and develop joint relations and interests.In conclusion, BYD hopes to maximize its investments in Turkish markets. This demonstrates that Turkey and China are keen to further develop bilateral ties in the future, especially as Turkey turns eastwards and China works to expand its activities in markets closer to Europe.

Why Chinese Car Companies are Investing in Turkey