Turkey Offers Incentives for Carmakers to Expand Production

Turkey will allow carmakers that add at least 100,000 units annual capacity in Turkey to import additional vehicles equaling 15 percent of that amount without tariffs, Economy Minister Zafer Caglayan said.

Producers making new investments in engine production will be able to import the equivalent of 30 percent of the new car capacity to Turkey duty-free, Caglayan also said in a speech in Istanbul today. He didn’t say how many engines would be required for that tax break. The new import tax cut for cars only applies to those in the low-end A, B and C segments, he said.

Turkey is introducing incentives for local providers of key products and services ranging from chemicals and steelmaking to tourism and education after a surge in imports widened the current account gap to as much as 11 percent of gross domestic product last year.

“This is an antidote against the current account deficit,” Caglayan said.

Fiat SpA (F)’s Tofas Turk Otomobil Fabrikasi AS (TOASO), Toyota Motor Corp. (7203), Honda Motor Co. (7267), Renault SA (RNO) make cars in Turkey, where total vehicle production may fall to 1.1 million vehicles this year from 1.19 million in 2011, according to the Istanbul-based Automotive Manufacturers Association of Turkey.

Stocks Gain

Tofas, a partnership between Fiat and Koc Holding AS (KCHOL), gained 1.8 percent to 6.92 liras at 2:16 p.m. in Istanbul, advancing for a third day to the highest level since May 23. Ford Otomotiv Sanayi AS (FROTO), owned by Ford Motor Co. (F) and Koc Holding, rose 0.6 percent to 16.2 liras.

The government will also give a sales tax rebate to construction companies spending more than 500 million liras ($280 million) on strategic projects, Caglayan said. A cabinet decree on the package was published in the Official Gazette today.

Certain investment in food, animal husbandry, greenhouse farming, leather, education, healthcare, drug-making, energy production excluding natural gas-fired power plants, ports, railways, sea transport and tourism are among those industries that will also benefit from incentives, Caglayan said. Incentives include a 50 percent cut in corporation tax, interest payment reductions and lower social security costs, he said.

The incentives will be larger in poorer regions of the country, including the east and southeast, where the government’s contribution may be as much as 60 percent of the investment value in large-sized projects, Caglayan said.

Investors will have until end of 2013 to apply to the government to benefit from the plan, he said.

To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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