Sales of passenger cars and light commercial vehicles in Turkey surged 127.5% year-on-year in October, the Automotive Distributors Association (ODD), said yesterday.

The surge follows an 82.35% year-on-year increase in September, both of which come amid a drop in borrowing costs since the Central Bank of the Republic of Turkey (CBRT) kicked off an easing cycle in its monetary policy in July.

The CBRT’s slashing of its benchmark policy rate – the one-week repo rate – was followed by a campaign initiated by public lenders to spur domestic demand and that offers cheaper loans to citizens when they buy domestically-made vehicles from select manufacturers.

Passenger car and light commercial vehicle sales in October increased to 49,075. They had plummeted 76.5% in October last year to 21,571 units.

Passenger cars constituted the bulk of October’s sales, with 39,996 automobiles sold, rising 138%, while light commercial vehicle sales soared 91% during the same period.

In the January-October period of this year, sales fell 31.9% on an annual basis to 330,384, the association said. Amid a high surge in sales, it also went on to revise its sales forecast for this year to 450,000-500,000 vehicles from a previous forecast of 340,000-380,000.

The association revealed its first market forecast for next year at 525,000-575,000. The mid-point of forecasts indicates that the sector is projected to grow 16% in 2020.

The recent rise comes after months-long narrowing in the market, which has been contracting since last April. High volatility in foreign exchange rates, followed by a high increase in interest rates on loans led to a sharp decline in domestic demand.

Since July, Turkey’s central bank slashed its one-week repo auction rate by 1,000 basis points. In its July meeting, the bank cut the one-week repo auction rate by 425 basis points, before slashing the rate further by 325 basis points in September and 250 basis points late last month to 14%, taking advantage of slower inflation and a steadier Turkish lira.

In the face of rising inflation, the CBRT had increased the interest rates to 24% in September 2018, from 17.75% at the time.

In a joint statement on Sept. 26, the three state lenders, Ziraat Bank, Halkbank and Vakıfbank, said they were initiating a campaign that offered lower interest rates on loans to purchase locally produced cars.

The three banks slashed the monthly cost of the 18-36 month loans for cars produced in Turkey and sold at a price between TL 50,000 and TL 120,000 to rates between 0.49% and 0.69%.

The lenders said they would also extend 30-60 months loans at the monthly interest rates between 0.49 percent and 0.69 percent for commercial vehicles sold for TL 72,000 and TL 120,000. The financing package is made available from Oct. 1 to Dec. 31.

In the meantime, Uludağ Automotive Industry Exporters’ Association announced late Sunday that Turkey’s automotive industry exports reached $25.4 billion in the first 10 months of this year.

Exports were around $2.5 billion per month on average during the said period, the association said.

Turkish automotive industry’s exports were also $2.8 billion in October, down 3.5% versus the same month last year.

Baran Çelik, the head of the association, said the sector ranked the first by taking a 17% share from the country’s overall exports in the month, he stressed.

In October, car exports, which constituted 43% of automotive exports, rose 1% to $1.2 billion, while supply industry exports climbed 3% to $966 million. Exports of motor vehicles for goods transport saw a decline of 18% to stand at $388 million, and tow trucks' exports dropped 64% year-on-year in the month.

Germany was the top destination for automotive exports in October with $398 million, followed by France ($288 million) and Italy ($282 million).