Competition in automotive is becoming oligopolized

Published 31.05.2019 23:57
Updated 02.06.2019 00:04

The disruptive innovation of the 21st century due to the internet and digital transformation, aside from the opportunities it brought to the world economy, is increasingly hardening global competition in all sectors, while making consumers' expectations more ambitious. In an environment where consumers can globally search for the products they need and bring them from anywhere in the world at the price they want, we can essentially think that competition at this level will be sustained. However, the reality of the market is pointing to the reverse.

Disruptive innovation, on a global scale, forces all sectors, millions of companies, to be innovative, to constantly invest in technology to maintain their claim and to unceasingly restructure themselves. This situation leads to – in many critically important sectors of the world economy, particularly automotive – many large-scale, even giant-sized, companies to merge and unite their forces to survive against disruptive innovation.

Companies aim to sustain their needs for new investments, inevitable technology investments and stronger marketing and sales activities in the global market with giant mergers. This is why, the decision to merge between Renault, where the French state is the biggest shareholder, and its Italian-American rival Fiat Chrysler, and the rapid development of the merger process, fully confirms this issue. With this merger, the world's third-largest automotive manufacturer will be formed, and this new formation will be able to produce around 9 million vehicles annually. High on the ranking of the world's largest automotive companies, we have Volkswagen and Toyota as the first two.

For the position of chairman of the board of the newly formed company, John Elkann, the chairman of the Agnelli family's investment company Exor, is mentioned, and for the CEO position, Renault Chairman Jean-Dominique Senard. The interesting thing is that the British branch of the Rothschild family and Exor are partners in The Economist magazine, and it is well known that French President Emmanuel Macron is very close to the Rothschild family. It is estimated that the annual turnover of the new company will reach 170 billion euros ($189.6 billion) and its net profit will be 8 billion euros. In time, we will see how beneficial the "oligopolization effect" will be for consumers on the global scale with such giant mergers in such critically important sectors.

National production accelerated

The New Economic Program (NEP) announced by Treasury and Finance Minister Berat Albayrak on Sept 20, 2018, pointed to the fact that the Turkish economy would spend the 2019-2020 period in a "balance-discipline" period, and from the beginning of 2021 on that the change would accelerate. In this respect, for price stability, while measures are being put in place to discipline inflation and towards supply-demand balance, measures are also being implemented one after another for financial stability, thus measures to establish a current account balance. After the primary macroeconomic balances are established, steps to accelerate the transformation in the Turkish economy will be expedited. Minister Albayrak has said on several occasions that the two main areas where economic management will fight to ensure sustainable and healthy growth would be inflation and the current account deficit. Therefore, in line with the National Production Move, Albayrak said many times that investments that would reduce Turkey's dependence on raw materials, intermediate good exports and machinery exports would be prioritized. In particular, it was emphasized that the pharmaceutical, chemical, petrochemical, energy, all kinds of machinery-equipment and especially software industries would be prioritized investment areas.

It is unacceptable that in a news article from the prestigious Reuters, concerning the TL 30 billion financial package, which will lead to an increase in domestic-national investment and capacity, accelerate sectors highly dependent on imports of raw materials and machinery and also considerably reduce unemployment and increase export potential, it is stated that there are mistakes in the title and ambiguity within the content is unacceptable.

Having said that, news and comments by the international media that consistently stress the current state of events and create the perception that a "major fracture" will take place over the S-400 issue in U.S.-Turkey relations, seems to have the intention of neutralizing excitement among investors and the real sector about the Acceleration package. Turkey has an economy that has the ability to carry out steps to strengthen financial discipline and corporate sector's financing abilities, together with steps to administer macro balances. I consider the first approach to overcome the problems outdated. Problems have always been better managed with steps towards reforms and investments.

Share on Facebook Share on Twitter
Disclaimer: All rights of the published column/article are reserved by Turkuvaz Media Group. The entire column/article cannot be used without special permission even if the source is shown.
However, quoted column/article can be partly used by providing an active link to the quoted news. Please click for details..