CEO 360 Degree Perspective of The in Turkey

Opportunities for OEMs and Suppliers in Turkey

M67B-18 August 2011 Disclaimer

• Frost & Sullivan takes no responsibility for any incorrect information supplied to us by manufacturers or users.

• Quantitative market information is based primarily on interviews and therefore is subject to fluctuation.

• Frost & Sullivan research services are limited publications containing valuable market information provided to a select group of customers in response to orders. Our customers acknowledge when ordering that Frost & Sullivan research services are for our customers’ internal use and not for general publication or disclosure to third parties.

• No part of this research service may be given, lent, resold or disclosed to non-customers without written permission.

• Furthermore, no part may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the permission of the publisher.

• For information regarding permission, write:

Frost & Sullivan 4 Grosvenor Gardens Sullivan House London SW1W 0DH United Kingdom

© 2011 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

M67B-18 2 Certification

• We hereby certify that the views expressed in this research service accurately reflect our views based on primary and secondary research with industry participants, industry experts, end users, regulatory organisations, financial and investment community and other related sources.

• In addition to the above, our robust in-house forecast and benchmarking models along with the Frost & Sullivan Decision Support Databases have been instrumental in the completion and publishing of this research service.

• We also certify that no part of our analyst compensation was, is or will be, directly or indirectly, related to the specific recommendations or view expressed in this research service.

M67B-18 3 Table of Contents

Objective and Scope 16

Research Methodology 17

Key Industry Participants 18

Executive Summary 19

• Top Strategic Factsheet-Light Vehicle Market in Turkey 20

• Turkey’s Demography-An Overview 21

• Turkey’s Economy-An Overview 22

• Turkey-Urbanization Trend 24

• Istanbul Megacity- Ownership and Commute Trend 26

• Global Light Vehicle Sales 2020-Regional Overview 27

• Global Light Vehicle Production 2020-Regional Overview 28

• Market for in Turkey 29

• Turkish Light Vehicle Market Overview-Light Vehicle Sales and Production 30

• Light Vehicle Production by Segment 31

• Light Vehicle Sales by OEMs 32

• Light Vehicle Sales - Market Share Analysis by OEMs 33

M67B-18 4 Table of Contents

• Light Vehicle Sales - Market Share Analysis by OEM’s Country of Origin 34

• Role of Ministry and Key Organisations in the Implementation of Automobile Industry Plan 35

• Customer Segmentation based on Vehicle Length and Price Analysis 36

• Vehicle Variant versus Sales and Price Analysis 37

• Standard versus Optional Feature Analysis 38

• Dealer Point Analysis by OEM 40

• Dealer Point Analysis by City 41

• Dealer Point Revenue versus Profitability and Customer Payment and Services Options 42

• E-Mobility in Turkey-An Overview 43

• Renault’s Electric Vehicle Strategy-A Case Study 44

• Turkish Automotive Industry - SWOT Analysis 45

Urbanization in Turkey-Impact on Mobility 46

• Global Mega-trend: Three Main Trends in Urbanization 47

• Global Mega-trend: Rise of Megacities 48

• Global Mega-trend: Top 49 Megacities by 2025 49

• Global Mega-Trend: Trends in Megacities 50

• Global Mega-trend: Three Key Challenges 51

• Turkey’s Urbanization Trend-An Overview 52

M67B-18 5 Table of Contents

• Istanbul Megacity - Demography and Landscape 54

• Istanbul Megacity-Land Use and Density 55

• Istanbul Megacity-Car Ownership and Commute Trend 56

• Istanbul Megacity-City Planning 57

• Istanbul Megacity-Key Developments 58

Turkey Automotive Industry - An Overview 59

• PESTLE Overview of Turkey 60

• Turkey’s Interest Rates versus Consumer Loan Rates 61

• Market Drivers and Restraints 62

• Excise Duty and Tax Structure for Passenger Vehicles 63

• National Automotive Policy 64

• Turkish Automotive Belt 65

• Joint Ventures, Partnerships and Alliances 66

• Structure of Turkish Automotive Industry 68

• Automotive Exports from Turkey 69

• Light Vehicle-Production, Export, Sales and Imports 70

• Light Vehicle - Sales and Import 71

• Incentive Instruments for Automotive Investment 72

M67B-18 6 Table of Contents

• Tax Exemptions and Other Incentives for Automotive Investments 73

• Foreign Direct Invest Framework 74

Turkey Light Vehicle Market - An Outlook 75

• Turkish Light Vehicle Market Overview-Light Vehicle Sales and Production 76

• Light Vehicle Production by Segments 77

• Light Vehicle Production by OEM 78

• Light Vehicle Sales by OEM 79

• Light Vehicle Production versus Capacity 80

Turkey Light Vehicle Market-Key Analysis 81

• Customer Segmentation based on Vehicle Length versus Price Analysis 82

• Vehicle Variant versus Sales and Price Analysis 85

• Standard versus Optional Feature Analysis 88

• Standard versus Optional Feature Analysis-Renault 89

• Standard versus Optional Feature Analysis-Ford 90

• Standard versus Optional Feature Analysis-Fiat 91

• Dealer Point Analysis by City 92

• Dealer Point Analysis by OEM 94

M67B-18 7 Table of Contents

• Dealer Point Analysis by OEM versus City 95

• Dealer Point Selection Criteria (Top 5) 96

• Dealer Point Revenue versus Profitability and Customer Payment and Services Options 97

E-Mobility in Turkey 98

• E-Mobility in Turkey-An Overview 99

• Roadmap for EV Market in Turkey 100

• Incentives and Taxation Policies for Electric Vehicles 101

• Renault’s Electric Vehicle Strategy-A Case Study 102

• Electric Vehicle Production by OEM-Roadmap 103

• Electric Vehicle Model Line-up for Domestic Sales 104

• Electric Vehicle Model Line-up for Domestic Sales by Vehicle Segment 105

• EV Charging Infrastructures in Selected Cities 107

• Electric Vehicle Eco-System in Istanbul Megacity 108

Key Conclusions 110

• Conclusion 111

About Frost & Sullivan 112

M67B-18 8 List of Figures

Automotive Industry: Other Macro-Economical Statistics (Turkey), 2010, 2011, 2012 and 2013 21

Automotive Industry: Demography Details 2 (Turkey), 2010-2013 21

Automotive Industry: Economy (Turkey), 2007, 2010 and 2015 22

Automotive Industry: Fuel Prices (Turkey), 2007-2011 23

Automotive Industry: Urbanization Trend (Turkey), 2010 and 2023 25

Automotive Industry: National Automotive Policy (Turkey), 2010 64

Automotive Industry: Joint Ventures, Partnerships and Alliance (Turkey), 2010 66

Automotive Industry: Incentive Instruments for Automotive Investment (Turkey), 2010 72

Automotive Industry: Tax Exemption and Other Incentives for Automotive Investment (Turkey), 2010 73

Automotive Industry: Foreign Direct Investment Framework (Turkey), 2010 74

M67B-18 9 List of Charts

Automotive Industry: Automotive Production and Top 5 OEMs Share (Turkey), 2010 and 2018 20

Automotive Industry: Automotive Sales and Top 5 OEMs Share (Turkey), 2010 and 2018 20

Automotive Industry: Population Statistics (Turkey), 2010, 2015, 2020 and 2025 21

Automotive Industry: Age Demography (Turkey), 2010 and 2025 21

Automotive Industry: GDP Details (Turkey), 2007-2015 22

Automotive Industry: Fuel Prices (World), 2010 23

Automotive Industry: Urbanization Trend (Turkey), 2010 24

Automotive Industry: Urbanization Trend (Turkey), 2010 and 2023 25

Automotive Industry: Car Density in Istanbul Megacity (Turkey), 2010 and 2025 26

Automotive Industry: Light Vehicle Sales (World), 2010 and 2020 27

Automotive Industry: Light Vehicle Production (World), 2010 and 2020 28

Automotive Industry: Market for Cars (Global), 2010 and 2015 29

Automotive Industry: Light Vehicle Production and Sales (Turkey), 2007-2018 30

Automotive Industry: Light Vehicle Production (Turkey), 2010 and 2018 31

Automotive Industry: Light Vehicle Sales (Turkey), 2010 and 2018 32

M67B-18 10 List of Charts (continued)

Automotive Industry: Market Share Analysis of Top 11 OEMs (Turkey), 2009 and 2010 33

Automotive Industry: Market Share Analysis by OEM’s Country of Origin (Turkey), 2009, 2010, 2018 34

Automotive Industry: Role of Ministry (Turkey), 2010 35

Automotive Industry: Customer Segmentation (Turkey), 2010 36

Automotive Industry: Vehicle Variant versus Sales and Price (Turkey), 2010 37

Automotive Industry: Standard versus Optional Feature Analysis (Turkey), 2010 38

Automotive Industry: Standard versus Optional Feature Analysis for Renault (Turkey), 2010 39

Automotive Industry: OEM Dealer Point Analysis (Turkey), 2010-2018 40

Automotive Industry: Dealer Point Analysis by City (Turkey), 2010 41

Automotive Industry: Dealer Revenue versus Profitability (Turkey), 2010 42

Automotive Industry: Customer Payment Option (Turkey), 2010 42

Automotive Industry: Original versus Substitute Part Option (Turkey), 2010 42

Automotive Industry: E-Mobility-An Overview (Turkey), 2010 43

Automotive Industry: Renault-Electric Vehicle Offering (Turkey), 2010 44

Automotive Industry: Urbanization Trend (World), 1950-2025 47

Automotive Industry: Megacities-Structure (World), 1950, 2000 and 2025 48

M67B-18 11 List of Charts (continued)

Automotive Industry: Top 49 Megacities (World), 2025 49

Automotive Industry: Impact of Urbanization (World), 1950-2025 50

Automotive Industry: Key Obstacles (World), 2010 51

Automotive Industry: Urbanization Trend (Turkey), 2010 52

Automotive Industry: Urbanization Trend (Turkey), 2010 and 2025 53

Automotive Industry: Istanbul Megacity-Demography and Landscape (Turkey), 1990-2025 54

Automotive Industry: Istanbul Megacity-Population Density (Turkey), 2007 55

Automotive Industry: Istanbul Megacity-Employment Density (Turkey), 2007 55

Automotive Industry: Istanbul Megacity-Cars Per Household (Turkey) 2007 and 2023 56

Automotive Industry: Istanbul Megacity-Modal Split (Turkey), 2006 56

Automotive Industry: Istanbul Megacity-Car Density (Turkey) 2010 and 2025 56

Automotive Industry: Istanbul Megacity-City Planning (Turkey), 2007-2025 57

Automotive Industry: Istanbul Megacity-Key Developments (Turkey), 2025 58

Automotive Industry: PESTLE Analysis (Turkey), 2010 60

Automotive Industry: Interest Rates (Turkey), 2009-2010 61

Automotive Industry: Market Drivers and Restraints (Turkey), 2011-2018 62

Automotive Industry: Excise Duty and Tax Structure (Turkey), 2010 63

Automotive Industry: Automotive Belt (Turkey), 2010 65

M67B-18 12 List of Charts (continued)

Automotive Industry: Structure of Automotive Industry(Turkey), 2010 68

Automotive Industry: Automotive Export Revenue by Country (Turkey), 2007-2010 69

Automotive Industry: Light Vehicle - Exports on Production (Turkey), 2007-2010 70

Automotive Industry: Light Vehicle - Imports on Sales (Turkey), 2007-2010 70

Automotive Industry: Light Vehicle Sales and Import (Turkey), 2010 71

Automotive Industry: Light Vehicle Production and Sales (Turkey), 2007-2018 76

Automotive Industry: Light Vehicle Production-Segment Growth (Turkey), 2010 and 2018 77

Automotive Industry: Light Vehicle Production by OEM (Turkey), 2010 and 2018 78

Automotive Industry: Light Vehicle Sales-Breakdown by OEM Group (Turkey), 2010 and 2018 79

Automotive Industry: Light Vehicle Production By Vehicle Segment (Turkey), 2010 80

Automotive Industry: Light Vehicle - Customer Segmentation (Turkey), 2010 82

Automotive Industry: Vehicle Variant versus Sales and Price Analysis (Turkey), 2010 85

Automotive Industry: Standard versus Optional Feature Analysis (Turkey), 2010 88

Automotive Industry: Standard versus Optional Feature Analysis - Renault (Turkey), 2010 89

Automotive Industry: Standard versus Optional Feature Analysis - Ford (Turkey), 2010 90

Automotive Industry: Standard versus Optional Feature Analysis - Fiat (Turkey), 2010 91

Automotive Industry: Dealer Point Analysis by City (Turkey), 2010 92

Automotive Industry: OEM Dealer Point Analysis (Turkey), 2010 94

M67B-18 13 List of Charts (continued)

Automotive Industry: Dealer Point Analysis by OEM versus City (Turkey), 2010 95

Automotive Industry: OEM Dealer Point Selection Criteria (Turkey), 2010 96

Automotive Industry: Dealer Revenue versus Profitability (Turkey), 2010 97

Automotive Industry: Customer Payment Option (Turkey), 2010 97

Automotive Industry: Original versus Substitute Part Option (Turkey), 2010 97

Automotive Industry: E-Mobility-An Overview (Turkey), 2010 99

Automotive Industry: EV Market Roadmap (Turkey) 2010-2020 100

Automotive Industry: Incentives and Taxation Policy for Electric Vehicles (Turkey), 2010 101

Automotive Industry: Renault-Electric Vehicle Offering (Turkey), 2010 102

Automotive Industry: EV Production by Model (Turkey) 2011-2015 103

Automotive Industry: EV Sales Launch by Model (Turkey) 2011-2013 104

Automotive Industry: EV Sales Launch by Segment (Turkey) 2010-2013 105

Automotive Industry: EV Charging Infrastructure (Turkey) 2010 107

Automotive Industry: Electric Vehicle Eco-system in Istanbul Megacity (Turkey), 2010 108

Automotive Industry: Istanbul Electric Vehicle Ecosystem (Turkey), 2010 109

Automotive Industry: Key Conclusions (Turkey), 2010 111

M67B-18 14 Acronym

ABS Anti-lock Braking System KDV Katma Değer Vergisi APS Adjustable Positioning System km Kilo Meter ASR Anti-Slip Regulation Kw Kilo Watt BAS Brake Assist System kWh Kilo Watt Hour CAGR Compound Annual Growth Rate Li-Ion Lithium Ion CBRT Central Bank of the Republic of Turkey MTV Motor Vehicle Tax CC Cubic Capacity N.M. Newton Meter CIT Corporate Income Tax OEM Original Equipment Manufacturer CO2 Carbon Di-Oxide OSD Otomotiv Sanayi Derneği EBA Electronic Brake Assist ÖTV Özel Tüketim Vergisi EBD Electronic Brakeforce Distribution R&D Research & Development EDL Electronic Differential Lock SANTEZ Industrial Thesis Program EFTA European Free Trade Association SCT Special Consumption Tax ESP Electronic Stability Programme SME Small and Medium Enterprise EU European Union SPO State Planning Organization EV Electric Vehicle TCS Traction Control System EVT Engined Vehicle Tax TRY Turkish Lira FDI Foreign Direct Investment TTGV Turkish Technology Development Foundation GBP Great Britain Pounds TUBITAK Scientific and Technological Research Council of Turkey GDP Gross Domestic Product UK United Kingdom GM General Motors US United States of America ISKUR National Recruitment Agency VAT Value Added Tax ISPARK İstanbul Otopark İşletmeleri Ticaret A.Ş. VSC Vehicle Stability Control

M67B-18 15 Objective and Scope

Project Aim: The Objective of the study is to understand the trends in light vehicle market in Turkey and its future growth.

Scope of the project includes: Geographic Scope: Only Turkey • Light Vehicle Production • Light Vehicle Sales • Light Vehicle Exports and Imports • Regulations and Tax systems for Light Vehicles Product Scope: Only Light Vehicles (Passenger Cars • Dealership Analysis and Light Commercial Vehicles) • Light Vehicle Model Pricing Analysis Segment Examples • Light Vehicle Variant Analysis A-Basic Fiat 500, Hyundai i10, Tata Nano • Standard and Optional Features in Light Vehicles B-Subcompact Citroen C3, Fiat Punto, Hyundai Getz/i20 • Electric Vehicle Market Analysis C-Compact Fiat Linea, Honda Civic, Renault Fluence • Regulations and Tax Systems for Electric Vehicles D-Midsize BMW 3 Series, Volkswagen Passat • Country Profile E - Large BMW 5 Series, Mercedes E Class, • Urbanization and its impact F-Large Plus Audi A8, BMW 7 Series, Mercedes S Class • Government structure and planning to promote automotive industry G-Sports Audi A5, BMW Coupe, Fisker Karma • Automotive belt and value chain structure MPV (LCV) Ford Galaxy, Renault Espace analysis Pickup (LCV) Isuzu I and N Series, Nissan Frontier, • Benchmarking against global automotive SUV Ford Explorer, Land Rover Defender industry. Van (LCV) Citroen Berlingo, Fiat Fiorino, Ford Transit

M67B-18 16 Research Methodology

Research Methodology: Frost & Sullivan’s research study is based on secondary and primary research data. Secondary Research: Extraction of information from existing research services and project material within the F&S data base, to include data and information gathered form technical papers, specialized magazines, seminars and internet research. Primary Research: Over 25 interviews have been conducted face-to-face and over the phone by senior consultants/industry analysts with Vehicle Manufacturers, Original Equipment Suppliers, regulation authorities and Distributors. Primary research has accounted for 80% of the total research.

Market Measurement Timeline: The study period is from 2010-2018 with 2010 as the base year and 2011–2018 as the forecast period.

M67B-18 17 Key Industry Participants

List of Key Participants

BD Otomotiv Fiat - TOFAŞ TÜRK OTOMOBİL FABRİKASI A.Ş. Ford - FORD OTOMOTİV SANAYİ A.Ş. FULLCHARGER Türkiye Honda - HONDA TÜRKİYE A.Ş. Hyundai - HYUNDAI ASSAN OTOMOTİV SANAYİ VE TİCARET A.Ş. İnci Holding A.Ş. Isoto Group İstanbul Energi A.Ş. Koç Holding Mutlu Akü ve Malzemeleri A.Ş. Nissan Otomotiv TR Otokar - OTOKAR OTOBÜS KAROSERİ SANAYİ A.Ş. Otomotiv Sanayi Derneği PSA - Peugeot Türkiye Siemens A.Ş. Tata - TATA TÜRKİYE Toyota - TOYOTA OTOMOTİV SANAYİİ TÜRKİYE A.Ş.

M67B-18 18 Executive Summary

19 Top Strategic Factsheet-Light Vehicle Market in Turkey

Automotive Industry: Automotive Production and Top 5 OEMs Share High Urbanization Rate-Demands City specific Strategies (Turkey), 2010 and 2018

• 1 Megacity, 2 Super-Cities, 9 Emerging-cities and 3 Mega- ~1.4 Million corridors CAGR 20.0% Top 5 OEM ‘10-‘18 Trend • Realignment and optimization of dealer points through hub- 1Million Ford 1.6%

spoke and multi-brand dealership concepts. 23.0% 18.0%

• Car ownership to increase by about 35 per cent and car Renault (2.6%) & SullivanFrost 17.0% commuting to increase by 3 per cent by 2023 in Istanbul 29.0% Megacity. 12.0% Fiat 0.3%

Production 21.0% 8.0% Toyota 9.0%

Increasing Domestic Sales 8.0% Power J.D. and 25.0% • Only 134 cars per 1000 adults in Turkey 7.0% Hyundai 3.9% 12.0%

• Reduced Special Consumption Tax (SCT) and low interest Source: 2010 2018 rates to increase the uptake of new cars and push Automotive Industry: Automotive Sales and Top 5 OEMs Share accumulated sales for the next two years. (Turkey), 2010 and 2018 2010. ~1.2 Million • Market for Electric Vehicles in the introduction stage but is 15.0% Top 5 OEM CAGR expected to reach about 90,000 units by 2017. Group ‘10-‘18 Trend 14.0% Renault – 761,600 3.3% Customer Segmentation Nissan 17.0% 13.0%

• Seven different customer segments identified with high selling Ford 3.2% models catering to the (Low/Upper) medium family/fleet 16.0% 11.0%

customer segment. Sales 11.0% 11.0% VW 7.0% • High selling compact cars and sedans catering to the medium 15.0% 9.0% Fiat 1.7% family consumer segment have more than 20 variants. 36.0% 32.0% • Models catering to the low-medium customer segment do not PSA 6.6% have more variants as they offer more options with limited Positive 2010 2018 Negative variants. VW Growth Growth Note: figures All rounded;are is the yearbase Ford Renault Nissan Fiat Toyota Hyundai Others PSA

M67B-18 20 Turkey’s Demography-An Overview Over 7 per cent GDP, young population and fiscal reforms push the country towards stable and sustainable growth

Automotive Industry: Age Automotive Industry: Population Automotive Industry: Other Macro-Economical Statistics Demography (Turkey), 2010 and Statistics (Turkey), 2010, 2015, (Turkey), 2010, 2011, 2012 and 2013 2020 and 2025 2025 Population Statistics 87.4 Above (in Million) 10% 2010 2011 2012 2013 60 14%

83.9 Unemployment 29% 11.00 10.66 10.32 9.97 35 - 59 rate (% Change) 34%

80.0

Number of 16,708 16,975 17,245 17,520 35% 15 - 34 households 30%

73.7 Private consumption per 6,742 7,198 7,604 7,994 26% 0 - 14 22% head (US $)

2010 2015 2020 2025 2010 2025

Automotive Industry: Demography Details 2 (Turkey), 2010-2013 • Population is increasing on an average of 1.5 per cent each year. 2010 2011 2012 2013 • 64 per cent of population will be between the age group 15 Private consumption per 9,631 10,282 10,862 11,419 to 59 years. head (Turkish Lira) • Share of people in the age group between 35 to 59 will Unemployment rate (% increase by 5 per cent 11.00 10.66 10.32 9.97 Change) • Current fiscal reforms to push the country to have a stable Note: All figures are rounded; the base year is 2010. and sustainable economic growth. Source: IMF, TURKSAT, Frost & Sullivan

M67B-18 21 Turkey’s Economy-An Overview Lowering inflation and interest rates leading to increase in private consumption will boost the Turkish Economy in the forthcoming years

Automotive Industry: GDP Details (Turkey), 2007-2015

1,500.00 10.0 Gross domestic product, current prices Real GDP Growth (%)

8.0

1,000.00

) 6.0

500.00

4.0

($ ($ Billion Growth (%) Growth

GDP GDP 0.00 2.0 2007 2008 2009 2010 2011 2012 2013 2014 2015

0.0 Real Real GDP (500.00)

Year Frost & Sullivan &Frost

(2.0) ,

(1,000.00) (4.0) IMF :

(1,500.00) (6.0) Source

Automotive Industry: Economy (Turkey), 2007, 2010 and 2015

• Turkish economy survived the global economic crisis 2007 2010 2015 without any bank bailouts. • Strong GDP growth at 7.8 per cent in 2010, as compared Inflation (% Avg.) 8.7% 8.6% 4.0% to (4.6) per cent in 2009 and grew by 1.8 per cent in the Q1 of 2010. • The low interest rates have helped the country to recover Exchange Rate (Try to GBP) 0.3823 0.4296 from last year’s 4.6 per cent decline in GDP. • Low interest rates boosting consumers demand. FDI (GBP, Billion) 11.00 5.80 Source: IMF, TUIK, Oanda.com, Frost & Sullivan

M67B-18 22 Turkey’s Economy-An Overview (continued) Fuel Cost  High Fuel cost poses a challenge for conventional gasoline vehicle, but can this provide an opportunity for Hybrid or Electric Vehicles?

Automotive Industry: Fuel Prices (World), 2010

3.0 2.6 2.0 2.5 1.8 1.8 1.7 2.0 1.5 1.3 1.5 0.9 0.8 1.0 /Dollar) 0.5 0.1

0.0 Litre

Gasoline 95 Turkey Holland UK Italy France Japan Greece US Russia Saudi Arabia (

Prices Prices inJan’10 Source: PETDER, Frost & Sullivan

Automotive Industry: Fuel Prices (Turkey), 2007- 2011

Fuel Prices litre/USD Oil Prices Istanbul - Turkey Gasoline 95 Gasoline 97 Motorin Eurodiesel (Brent; US$/b) 01.02.2007 1.90 1.93 1.51 1.61 59

01.02.2008 2.61 2.66 2.15 2.26 89

01.02.2009 1.73 1.78 1.41 1.49 41

01.02.2010 2.45 2.47 1.91 1.99 72

01.02.2011 2.50 2.52 2.03 2.11 89

Percentage of 5-Year 31.6% 30.6% 34.4% 31.1% 51.0% Increase

Petrol Consumption Gasoline 95 Gasoline 97 Motorin EuroDiesel LPG Petrol consumption ('000 tones) 1,909 179 9,612 4,164 2,500 vehicles’10

Change (2009-2010) 4.9% 21.6% 4.6% 23.0% 8.4%

Source: PETDER, Frost & Sullivan

M67B-18 23 Turkey-Urbanization Trend Urban sprawl in each city along with the emergence of mega-corridors will require city-specific sales strategy and dealership networks

Automotive Industry: Urbanization Trend (Turkey), 2010

Istanbul Megacity Marmara Megacorridor  15.2 Million population  Istanbul, Bursa, Yalova, Kocaeli and Sakarya  About 3 Million cars on road  20.9 million population  Financial capital experiencing  Automotive Hub + Metal Industry and Tourism. sub-urbanization is expanding Ankara Greater City beyond the airport, which is  5.5 million population 23km from the CBD,  About 1.5 million cars on road northwards halfway to the  Capital city was enlarged from Black Sea and eastwards into 202,000 hectares to 780,000 Anatolia. hectares.  Along with Kocaeli city, the  Ongoing illegal sprawl megacity becomes a Mega- Kocaeli neglects agricultural land and region housing with more adds pressure on all natural than 17 million people values. Bursa Ankara  New development areas for industry and housing are planned at the fringes.  This can lead to new self- Konya sufficient cities Izmir Metropolian Adana Antalya Şanlıurfa  4.5 million population Hatay Gaziantep  About 1 million cars on road Mersin  Constitutes about half of entire Aegean Megacorridor Aegean region’s GDP.  Izmir, Manisa and Aydin  Experiences both sprawl in the Çukurova Megacorridor  7.2 million Population city fringes and shrinkage in  Gaziantep, Adana, Mersin and  Main Activities: Metal the core city due to unequal Hatay Industry, Agriculture, Tourism economic distribution and  8.2 million population uneven regional development.  Main activities: Textile, Petro- Legend Megacity Super City Emerging City Chemical and Agriculture. Source: Frost & Sullivan

M67B-18 24 Turkey - Urbanization Trend (continued) OEMs should focus more on the Emerging Cities to Expand the Dealer Network

Automotive Industry: Urbanization Trend (Turkey), 2010 and 2023

3.5 Legend Megacity Super City Emerging City GDP 2001 Cars on Current Prices 2010 2023 Road in 3.0 USD Population Population 2010 Istanbul 1 İstanbul 31,378 13,050,933 15,188,562 2,824,850

2 Ankara 11,175 4,686,009 5,486,347 1,298,621 2.5

3 İzmir 11,048 3,900,770 4,537,049 979,162 (Million) 2.0 4 Bursa 5,374 2,629,919 3,429,760 544,287

2010 5 Antalya 3,884 1,960,779 2,609,451 707,439 Ankara 1.5 6 Adana 4,385 2,053,465 2,153,855 452,759

7 Konya 3,498 2,004,743 2,152,428 492,542 Izmir 1.0

Antalya 8 Mersin 4,161 1,626,691 1,738,811 406,077 Cars Cars on Road in Bursa Adana Konya 9 Gaziantep 2,093 1,673,920 2,019,404 323,310 0.5 Hatay Gaziantep 10 Şanlıurfa 1,481 1,630,731 1,991,188 196,885

Mersin 11 Kocaeli 7,562 1,573,424 2,116,643 243,288 Şanlıurfa Kocaeli 0.0 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 12 Hatay 2,178 1,449,059 1,649,929 325,480

Population CAGR for 2010-2023

Key: *Size of the bubble: Population in 2010 Source: JICA, IMM, (2007) and Frost & Sullivan

M67B-18 25 Istanbul Megacity-Car Ownership and Commute Trend Car Ownership to increase by approximately 35 per cent, while the share of people commuting by car is to increase by 3 per cent in 2025

Automotive Industry: Car Density in Istanbul Megacity (Turkey), 2010 and 2025

Areas along the Bosphorus have the highest car density

2010 2025 Istanbul Average Car Density (cars per 1000) 138 150

Source: JICA, IMM, (2007) and Frost & Sullivan

• Vehicle registration has increased to about 20 per cent from a mere 200,000 in 1980 to about 1.7 per cent in 2007. • Vehicles registered in Istanbul accounts for about 26.4 per cent of the total vehicle registrations in Turkey. • Bakırköy (244 cars) and Beşiktaş (240 cars) in the European side and Kadıköy (216 cars) in the Asian side have the highest car ownership rates. • Eminönü (53 cars), Bağcılar (66 cars) and Esenler (68 cars) in the European side and Sultanbeyli (60 cars) in the Asian side have the lowest car ownership rates. • Bus and mini-bus play a main role in day-to-day commuting. • Share of cars will increase by 3 per cent by 2023. • Share of people commuting by public transportation will increase drastically by 2025, due to high investment to improve connectivity and frequency/access.

M67B-18 26 Global Light Vehicle Sales 2020-Regional Overview Turkey to emerge as the second largest market in East Europe

Automotive Industry: Light Vehicle Sales (World), 2010 and 2020

110 Million Vehicles 2020 70.7 Million Vehicles Western 2010 Europe 16.0% Western 2020 Sales by Key Regions South America Europe 7.0% 20.0% Others 3.0% South America 7.0% 60.0 Others 4.0% North America 48.4 Million 19.0% North America 50.0 20.0% Middle East 3.0% Other 4.1 Indonesia Eastern Europe Korea 1.1 1.5 8.0% Middle East 2.0%40.0 India Eastern Europe 7.8 5.0% Japan 4.9 20.7 Million 30.0 18.0 Million Asia Mexico UK 43.0% 8.3 Million 1.6 Asia 20.0 7.2 Million2.8 41.0% 1 Million 29.0 Canada 1.9

Vehicle Sales (Million Sales (Million Vehicle Units) Others 3.9 Turkey 1.3 Argentina Poland 0.8 2.4 Million UK 2.9 0.7 Africa 10.0 USA Spain 1.7 1.0% Other 2.0 17.2 Others Italy 2.8 1.2 France 2.8 Africa1.0% Russia 4.2 Brazil 5.3 Germany 3.9 0.0 Iran 2.4 Africa Asia Eastern Europe Middle East North America South America Western Europe Africa: South Africa. Asia: Australia, China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Taiwan, Thailand, New Zealand. Eastern Europe: Bulgaria, Bosnia, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey, Ukraine. Middle East: Egypt, Iran. North America: Canada, Mexico, USA. South America: Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Venezuela. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK Note: Vehicle Sales in Million Units. Note: All figures are rounded; the base year is 2010. Source: JD Powers / Frost & Sullivan

M67B-18 27 Global Light Vehicle Production 2020-Regional Overview Turkey to emerge as the second largest producer in East Europe

Automotive Industry: Light Vehicle Production (World), 2010 and 2020

109 Million Vehicles 2020 Western Europe 71.7 Million 2020 15.0% Vehicles Production South America 2010 by Key 6.0% Western Regions Europe 55.7 Million Others 1.0% 18.0% 60.0 North America 15.0% South America Other 2.5 6.0% Thailand 2.3 Middle East 2.0% 50.0 Korea 4.0

North America Eastern Europe

16.0% 9.0% India 8.3 MiddleMiddle EastEast 2.0%2.0%40.0 Eastern Europe 8.0% Japan 10.6 30.0 China 26 Asia 16.8 Million 51.0% Asia 5.5 Million 16.6 Million 20.0 49.0% China 9.3 Million Others 1.6 28 Mexico 3.2 ItalyUK 1.6

Vehicle Sales (Million Sales (Million Vehicle Units) Turkey Others1.5 Poland 0.78 Spain 2.8 Canada 2.3 Argentina 2.8 Africa 3.2 Italy 10.0 0.9 1.5 1.0% Russia France 2.7 Africa 1.0% Others 3.8 USA 11.3 1 Million 2.8 France Others Brazil 4.6 Germany2.6 6.4 Russia 3.2 Iran 2.5 0.0 1.9 Africa Asia Eastern Europe Middle East North America South America Western Europe Africa: South Africa. Asia: Australia, China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Taiwan, Thailand, New Zealand. Eastern Europe: Bulgaria, Bosnia, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey, Ukraine. Middle East: Egypt, Iran. North America: Canada, Mexico, USA. South America: Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Venezuela. Western Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK Note: Vehicle Sales in Million Units. Note: All figures are rounded; the base year is 2010. Source: JD Powers / Frost & Sullivan

M67B-18 28 Market for Cars in Turkey The market is far from saturation. Low car density with growing car market testify future growth potential

Automotive Industry: Market for Cars (Global), 2010 and 2015

1.5% Increasing population and high economic India growth to drive the

Turkey demand for cars

1.0% The United States of

2015 (%) 2015 Brazil - America China

The United 0.5% Kingdom South Africa Czech

Republic Population Population CAGR2010 for

0.0% 0 100 200 300 400 500 600 Poland

Germany -0.5% Car Density (per 1000 Adults) - 2010

Key: *Size of the bubble: Cars on road - 2015

Note: All figures are rounded; the base year is 2010. Source: OSD, ODD, JD Power/Frost & Sullivan

M67B-18 29 Turkish Light Vehicle Market Overview-Light Vehicle Sales and Production: High Domestic Demand will drive domestic production to reach 1.5 Million Volumes by 2020

Automotive Industry: Light Vehicle Production and Sales (Turkey), 2007-2018

Introduction of Chery; increase in Mass Production of capacity of Hyundai i20, and Ford Renault Fluence 1,600 Global Recession Transit models` Electric Vehicle (EU enter recession by 1,400 Q2/Q3 2008)

1,200

2008 Level

1,000 (‘000) 1 Million Vehicles Units Units 800 Sale by 2015

600 Key Market Drivers for Increase in Domestic Sales • Vehicle scrappage scheme to be proposed • Low interest rates for another two years. 400 • A steady GDP growth of 4 per cent pushing affordability to purchase car Temporary reduction of • Large addressable car market (only 100/1000 own a car) 200 SCT resulting pushing accumulated sales

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year Note: All figures are rounded; the base year is 2010. Source: OSD, ODD, JD Power/Frost & Sullivan

M67B-18 30 Light Vehicle Production by Segment Turkey will remain the hub of LCV production

Automotive Industry: Light Vehicle Production (Turkey), 2010 and 2018 1.4 Million

1Million

2018 Production 54.0% 5.0%

51.0%

4.0%

2018 -

3.0%

25.0% 24.0%

2.0% CAGR2010 for

1.0% 24.0% 22.0%

0.0% LCV C-Compact B-Sub Compact 2010 2018 Note: LCV includes Van and Pickup. SUV represents less than 1% of 2010 and expected to remain the same. Note: All figures are rounded; the base year is 2010. Source: JD Power/Frost & Sullivan • LCV: Ford increasing its Transit model; Karsan J10 production started by 2010; Fiat increasing production of Fiorino model. • B-Compact: Hyundai and Renault increasing production of respective models, while Fiat discontinuing the production of Palio post 2010. • C-Compact: Chery to start production of A3/Apola by 2013; Renault and Toyota to increase the production of their models while Fiat to discontinue the manufacturing of Linea post 2015.

M67B-18 31 Light Vehicle Sales by OEMs To achieve the 1 million mark by 2014, Ford may outpace Renault-Nissan and Fiat Groups for a short-Term, while Volkswagen and Honda are likely to witness a CAGR growth of 8 per cent.

Automotive Industry: Light Vehicle Sales (Turkey), 2010 and 2018

~1.2 Million

5.0% 2018 Sales 2.0% 761,600 2.0% 35.0% 3.0% 2.0% 4.0% 3.0% 2.0% 4.0% 3.0% 5.0% 1.0% 30.0% 7.0% 2.0% 8.0%

8.0% 8.0% 25.0%

2018 2018 11.0% 9.0% - 20.0% 11.0% 15.0%

15.0%

11.0% 12.0% CAGR2010 for

10.0% 16.0% 14.0%

5.0% 17.0% 15.0%

0.0% 2010 2018

Note: The OEM name on the X-Axis denote the entire group of marques under the banner.

Note: All figures are rounded; the base year is 2010. Source: JD Power/Frost & Sullivan

M67B-18 32 Light Vehicle Sales - Market Share Analysis by OEMs Volkswagen and PSA are the highest gainers, while Hyundai witnessed a major dip in its share

Automotive Industry: Market Share Analysis of Top 11 OEMs (Turkey), 2009 and 2010

Market Share - 2009 Market Share - 2010 Market Share Dynamics

Renault-Nissan 16.1% Renault-Nissan 16.7% 0.6%

Ford 15.2% Ford 15.6% 0.5%

Fiat 15.5% Fiat 14.8% -0.7%

Volkswagen 8.9% Volkswagen 11.2% 2.3%

PSA 7.9% PSA 9.5% 1.6% 95.1% 93.8%

Hyundai 12.7% Hyundai 7.9% -4.9%

1.5% General Motors 6.3% General Motors 7.8%

0.7% Toyota 4.6% Toyota 5.3%

0.0% Daimler 2.3% Daimler 2.3%

-0.8% Honda 2.9% Honda 2.1%

0.4% BMW 1.3% BMW 1.7%

Note: All figures are rounded; the base year is 2010. Source: JD Power/Frost & Sullivan

M67B-18 33 Light Vehicle Sales - Market Share Analysis by OEM’s Country of Origin: Share OEMs from Chinese, Indian and APAC expected to witness growth

Automotive Industry: Market Share Analysis by OEM’s Country of Origin (Turkey), 2009, 2010, 2018

Market Share - 2009 Market Share - 2010 Market Share - 2018

Indian, Chinese Indian Chinese Indian Chinese APAC APAC 0.8% 1.4% 0.5% 1.4% APAC 2.5% 3.7% 12.9% 8.8 % 8.6%

Japanese 11.2% Japanese Japanese 13.5% 11.4% European European 54.5 % 51.8%

American 23.6% European American American 50.9% 21.7% 20.8%

Note: European OEMs: VW, Fiat, PSA, Daimler and BMW groups; Renault group excluding Nissan. American OEMs: Ford, GM and Chrysler groups. Japanese OEMs: Toyota, Honda, Mitsubishi, Mazda, Izuzu, Suzuki and Fuji groups; Nissan. APAC OEMs: Hyundai and Proton group. Indian OEMs: Tata, Mahindra and others, Chinese OEMs: Chery, , Brilliance Motors, SsangYong Motors groups and others. Note: All figures are rounded; the base year is 2010. Source: JD Power/Frost & Sullivan

• Introduction of new models and increasing penetration of existing models from Chery, Geely and SsangYong Motors along with launch of various models by Brilliance Jinbei and other Chinese OEMs likely to increase the share of Chinese OEMs by about 2% in 2018. • Introduction of new models and increase in sales of existing models from Tata along with the launch of new models from Indian OEMs are likely to increase the market share of OEMs by 1 per cent in 2018. • Increasing penetration of existing models from Hyundai like Get/i20 and launch of new models like Solaris, Soul to push the share of APAC OEMs in Turkey by 2018.

M67B-18 34 Role of Ministry and Key Organisations in the Implementation of Automobile Industry Plan

Automotive Industry: Role of Ministry (Turkey), 2010

Ministry of Ministry of Industry Ministry of Transport Ministry of Finance Environment and and Trade Forestry

Regulates and implements Consumer protection; Regulates taxation Transposes and implements legislation on transport and regulation of automotive regulations on fuel quality, technical inspection of sales; support of SPO; emissions and end-of-life vehicles regulations on vehicle procurement construction OSD (automotive Undersecretariat of manufacturers Treasury association), TAYSAD, KOSGEB

Regulates FDI and incentives Consulting mechanisms: Suppliers and Small and Medium Industry Development Ministries, non-governmental organizations, Organization private sector and universities are involved in the development of policies, regulations and Undersecretariat for implementation issues TUBITAK Foreign Trade OEMs, component industry and national standardization body are represented in MARTEK Implements free movement of (technical committee on motor vehicles) Scientific and Technological goods; regulates import and Research Council of Turkey; R&D export regimes State Planning development Organization (SPO)

Prepares national development plans and annual programmes Source: OSD, ODD and Frost & Sullivan

M67B-18 35 Customer Segmentation based on Vehicle Length and Price Analysis We classify the market into 7 customer segments. Vehicle targeting in these customer segments should be priced at these respective levels

Automotive Industry: Customer Segmentation (Turkey), 2010

High-end family 200 Market

5 Series 175 E-Class This will be an interesting segment 150 for urban/city cars, especially in

Megacity like Istanbul and other 3 Series (Turkish Lira) (Turkish 125 densely populated areas like Izmir, Bursa and Adana. C-Class

100 Low-medium Executive Family family Market Upper-Medium Market family Market Tiguan Large-van Fleet 75 Low-end- Qashqai C5 Market family Market Passat Golf Hilux Transit 50 Fiesta Corsa Corolla and Civic A3 Megane Focus Fiorino Polo Fluence Yaris Clio Astra Transporter NP 300 Average Vehicle Price in Price in Vehicle Thousand Average Doblo 25 Punto Linea Getz Bipper Partner i10 and Low Medium Series 206/207 Berlingo Accent i20 /208 Kangoo Transit Connect Fleet/Family Market 0 3,200 3,600 4,000 4,400 4,800 5,200 5,600

Average Vehicle Length (mm) This will be an interesting segment with the launch of low cost and micro cars like Tata Nano Europa. Note: Only key models are considered. Note: All figures are rounded; the base year is 2010. Source: JD Power/Frost & Sullivan

M67B-18 36 Vehicle Variant versus Sales and Price Analysis Most of the high selling models cater to the (Low/Upper) Medium customer/fleet segment

Automotive Industry: Vehicle Variant versus Sales and Price (Turkey), 2010

Most of the high selling models cater to the (Low/Upper) Medium • The high selling compact cars and customer/fleet segment. sedans catering to the medium 35 family consumer segments have more than 20 variants Megan 30 Getz, i20, Corolla Doblo Qashqai Clio Troy Linea (Sedan) 25 Fluence Transit Grande Accent C-Class Punto 20 (Sedan)

Kangoo 15 Transporter C5 Fiesta Fiorino Passat Connect Corsa 10 E-Class Yaris 3-Series (Sedan) Caddy Nemo Focus Number of Variants (2010) Variants of Number Civic (Sedan) 5 Tiguan Partner Hilux Berlingo Bipper Astra (Sedan) 0 -5,000 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

-5 • Models catering to the Low- O-Bubble Size is Price Medium customer segments do Unit Sales (2010) Price Range not have more variants as they O-TL24,000 to TL30,000 offer more options with limited O - TL30,000 to TL40,000 variants. O-TL40,000 to TL50,0000 O-TL50,000 and above Note: Only key models are considered. Note: All figures are rounded; the base year is 2010. Source: JD Power/Frost & Sullivan

M67B-18 37 Standard versus Optional Feature Analysis Optional features in vehicles catering to the low-medium market with diverse customers as against the vehicles targeted for the upper-medium segment

Automotive Industry: Standard versus Optional Feature Analysis (Turkey), 2010

Features Few optional Options Wide range of Wide range of Few optional Few optional High optional features (AT) provided in variants due to variants but choices and elements for the choices but different the need of limited optional model variants customers to limited model

variants based different elements personalize their variants in most on the fleet functionality + vehicles of the models customer + + + AC, Sliding Airmatic, door, parking ESP, Parktronic, OPTIONAL Additional TCS, Leather Sunroof, sensor, Hillholder, Neckpro, side doors seats metallic paint alarm, CD Navigation Audio 50 APS, player, Heated seats hillholder

New models offer more packs and wide choice of options in their early stage of life cycle

Optimum level Limited comfort Moderate level High level of High level of Most of the Optimum level of safety and and safety of the safety safety and standard safety and of basic features

comfort features features and comfort comfort features features comfort features + + features + + + Traction Cruise FPS, Driver ABS, EBD, Immobilizers, control, VSC, control, ESP, BAS, ABS, EBD, and Passenger Driver airbags, electric airbags, Infotainment navigation, Adaptive Isofix, Driver hydraulic STANDARD control Electrical control on rain sensors, brakes, ASR, airbag steering wheel, windows extensions, steering brake assist, Pre-safe immobilizer mirrors wheel EDL Low-end Low-medium- Low-medium- Upper- Executive-end- High-end- Large-van- family market end fleet and end-family medium-end- family market family market fleet market family market market family market

Customer Segments Source: Frost & Sullivan

M67B-18 38 Standard versus Optional Feature Analysis-Renault Renault focuses more on safety as a standard, but has more variants leading to fewer optional features

Automotive Industry: Standard versus Optional Feature Analysis for Renault (Turkey), 2010

Price sensitivity

Comfort and Pleasure

Style/Technology Standard Features O . Basic safety features offered as P Design: Alloy wheels T Telematics: Navigation standard on commercial vehicles, I . Additional safety features offered as O standard on passanger vehicles. N A Functional Functional . Standard features vary depending on L versions of models Safety, Comfort Comfort ABS, AC, Pack; Auto AC, Elc.rear Optional Features STANDARD Audio windows, out-mirror

. Comfort features optional in higher S models. T Safety A Basic Safety . More variants are found within a N D Airbags, ABS* single vehicle variant leading to fewer Driver Airbag, A Seatbelt, * Depending on version optional features. R Immoblizer D

Kangoo Clio Megane Fluence Commercial Volume models

VARIANTS

Source: Frost & Sullivan

M67B-18 39 Dealer Point Analysis by OEM OEMs should plan for optimizing Dealer Network by setting up Multi-Brand Dealer points to share dealer points between the brands within the same Group

Automotive Industry: OEM Dealer Point Analysis (Turkey), 2010-2018

200 • High volume OEMs have more than 100 dealer points. • Dacia is currently using few dealer Renault points of Renault. • Similarly, Nissan can use the same 150 synergies of Renaults dealer points by establishing multi-brand dealer points

Dacia • To achieve the high sales growth, these OEMs should also consider Ford increasing their number of dealership Fiat 100

Hyundai

Dealer Points Points (2010) Dealer Opel Volkswagen Peugeot

Toyota Chevrolet Honda 50 Mitsubishi Nissan Kia Citroen Mazda Mercedes Audi

Skoda

BMW Geely Seat

0 -1.0% 1.0% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% Sales CAGR (2010-2018)

Key:*Bubble Size-Sales Volumes 2010 Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan

M67B-18 40 Dealer Point Analysis by City Emerging and super cities along with the upcoming mega-corridors demand realignment and optimization of dealer point through hub-spoke concept

Automotive Industry: Dealer Point Analysis by City (Turkey), 2010

Istanbul • 274 dealership Ankara • Turkey’s diverse urbanization trend poses a • Renault (30); Dacia • 74 dealership great challenge for OEMs for setting up dealer (23), Ford (20); • Fiat (7); Renault, points. Hyundai (17). Ford, Opel, Dacia (6 each); Chevrolet (5) • 1 Megacity with Population more than 10 Million • 2 Super cities, 9 Emerging cities and 3 Mega-Corridors Kocaeli Bursa • Overall dealer points have remained dense in the mega and super cities, offering customers the biggest selection of dealership to choose between brands and outlets. Konya Adana • Economic growth in the emerging cities and Antalya Şanlıurfa the rise of mega-corridors demands more Mersin Gaziantep Hatay dealership network as economic growth is expected to push high sales. • Cities in the mega-corridor region can adopt Izmir hub and spoke dealer network for • 74 dealership optimization. • Renault (11), Dacia (7), Fiat, Chevrolet, Opel (5 each) Legend: Number of 100 Plus 50 to 99 40 to 49 30 to 39 20 to 29 10 to 19 0 to 9 Dealer Points

Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan

M67B-18 41 Dealer Point Revenue versus Profitability and Customer Payment and Services Options

Automotive Industry: Dealer Revenue versus Profitability (Turkey), Automotive Industry: Customer Payment Option (Turkey), 2010 2010

• OEMs should encourage dealers to also • Dealers need to establish have vehicle servicing options as it more credit schemes with low creates more profitability for the dealers. interest rates in association with the financial agencies to 88.0% increase sales.

12.0% New car Retail 76.0% 33.0%

Purchase with cash Purchase with credit

12.0% Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan Used Car Retail Automotive Industry: Original versus Substitute Part Option (Turkey), 2010 6.0% • Aftermarket participants have more opportunities beyond the guarantee period. Customers opt for substituted over original 12.0% part during servicing 75.0 to Car Servicing 1.0 to 100.0% 25.0% 61.0% Post- Guarantee Guarantee period 0.0% 20.0% 40.0% 60.0% 80.0% period

Revenue Generation Profitability

Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan

M67B-18 42 E-Mobility in Turkey-An Overview About 90,000 electric vehicles expected on road by end of 2017, with a annual sale of 32,000 units by then

Automotive Industry: E-Mobility-An Overview (Turkey), 2010

• Government promoting electric vehicles through reduction of the Special Consumption Tax and by setting up EV charging infrastructure in selected municipalities. • Recommendation for special grant to support battery manufacturers to develop and produce Li- Driving ion battery for EVs has been declared in Strategy Document for Automotive Industry (2011-2014). Force • Reduction of Special Consumption Tax for EV according to Motor Power (3% from 37% for less than 85kW Motor Capacity). This reduces the price of EV for domestic sales.

• Renault started production of the Fluence Z.E. in it Bursa plant with the aim of exporting to Israel, Production Denmark and also to sell in the domestic market. Hub • Four other OEMs with high probability of starting EV production can be Fiat, BD Oto, Titler and BYD. • CV manufacturers can produce bodies for electric vehicles to be assembled outside Turkey. • Five electric vehicles being sold  3 Tesla Roadster, a Renault Fluence Z.E. and a Mitsubishi i-MiEV Domestic • Renault to sell its Fluence Z.E. model at 26,300 Euros. Has currently clocked order for about 200 cars Market for different municipalities. • 14 Models expected to be launched by 2013. • BD automotive expected to electrify five selected models of Fiat and Renault. • Istanbul municipality is leading in terms of setting up charging infrastructure-Currently eight charging Infrastructure stations installed and total of 20 stations expected to be installed by the end of 2011. • Other Municipalities geared up for EV: Ankara, Izmir and Gaziantep. • Public charging stations to is expected to increase from approximately 40 units in 2011 to 3,800 units by 2017. • Insufficient energy sources-Lack of renewable energy sources. Challenges • Lack of suppliers and materials. (No Li-Ion battery manufacturers and electric motor suppliers). • No concrete government policies. • Poor infrastructure setup. Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan

M67B-18 43 Renault’s Electric Vehicle Strategy-A Case Study First EV to be produced in Turkey is also expected to be sold for 26,300 Euro in the domestic market

Automotive Industry: Renault-Electric Vehicle Offering (Turkey), 2010

Target Market Price Comparison between Diesel and Electric versions Export markets; Israel, Denmark Domestic market-fleet segment (mainly) • Fluence Dynamique 1.5 Fluence dCi 85 bg TRY 1.5 48,950 (Diesel) • inclusive of 37 per cent Manufacturing SCT and 18 per cent VAT facility location • 26,300 Euros* Bursa, Turkey Fluence TRY Z.E. • + 3% SCT and 57,090 (Electric) 18% VAT

Specification *Battery price is not included because of Renault’s sale policy that batteries Battery Supplier are leased to their clients (€ 79 monthly) • NML + NEC Tokin • All electric range; 160 km • Top speed; 136 km/h • Battery Other Renault EV Models • Battery capacity; 22kWh manufacturing Kangoo Express Z.E. • Max motor power 70 kW Location; Japan, Twizy Z.E. • Max motor Torque 226 US, UK Zoe Z.E. N.m.

Battery Features • 100% Zero emission Business Model vehicle • €26,600 for • 22 kWh Li-Ion battery vehicle • 70 kW AC sync Motor / • €79 per month for 226 N.m. torque battery • 4 Year; 120,000 km battery warranty

Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan

M67B-18 44 Turkish Automotive Industry - SWOT Analysis

Strengths Weaknesses •Well established automotive industry with about 15 •High Special Consumption Tax (SCT) and Value Added OEMs (9 LV OEMs) present Tax (VAT) increases the price of vehicles for domestic comsumptions dearer. •Government support programmes and incentives to prompote manufacturing and R&D capabilities. •No clear automotive policy finalized to lay a concrete future for the automotive industry. •The principles of free and fair trade have positioned Turkey as a respected partner. •Can offer more incentives for FDI investments like some other developing markets do •Concrete FDI framework and other regulations. •Industry strengths lie in manufacturing of mechanical •Experience in export activities and international parts and not in vehicle electronics accreditation •Low R&D expenditure of industry and less number of •Good SME supplier base technological innovations and breakthroughs

Opportunities Threats •Geographical proximity to Europe, Middle-East and Asia •Loss of production capacity to other low cost countries in Eastern Europe, China or India that offer more •Customs Union with European Community enables incentives and lower costs Turkey to use its strength in trade without being hindered by tariff issues •Competition from Eastern European Countries as they •Influence of EU in Turkey’s trade relations has are offering attractive incentives and have lower intensified with the beginning of the full membership wages process •Raw material prices like steel likely to increase by 20 •Support of R&D likely to help Turkey to shift away to 30 per cent from a mere manufacturing location •Large number of SME type suppliers and no big global supplier.

M67B-18 45