Turkey Concessions: 40% Tariff Cut Spurs BYD's Expansion Frenzy

Turkey is poised to become the next Hungary.

According to reports, BYD is investing $1 billion to build a factory and research and development center in western Turkey with an annual production capacity of 150,000 vehicles. The factory is scheduled to commence production by the end of 2026 and will create over 5,000 local jobs. In exchange, Turkey has softened its stance, announcing the exemption of additional tariffs for automobile manufacturers investing in the country.

Why has the Turkish government suddenly changed its mind on tariff policies? What signal does BYD's acceleration of overseas investment and factory construction amidst escalating trade tensions convey? In this edition of True Lithium Observations, let's discuss this topic together.

Turkey, Desperately Attracting Investment

The Turkish tariff hammer came and went quickly. In June, Turkey decided to impose an additional 40% tariff on imported cars from China, but before it could be officially implemented, Turkey softened its stance. This change seemed sudden but was actually traceable.

In May, there were reports that Turkey, in order to promote investment in its domestic electric vehicle sector, frequently negotiated with Chinese electric vehicle companies, including BYD and Chery, two giants, in addition to SAIC Motor and Great Wall Motors. At that time, Turkish officials publicly called for the completion of these negotiations as soon as possible, expressing a welcome for Chinese electric vehicle companies to invest in their country.

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Analyzing this logic, Turkey's recent decision to raise the tariff hammer may have two important reasons: First, local electric vehicles really can't compete with China, just like Europe and the United States, to protect the domestic automotive industry chain. Second, there is a significant intention to force Chinese electric vehicle companies to invest and build factories in Turkey. After all, including Chinese vehicle manufacturers can both improve the local new energy vehicle industry chain and create a considerable number of local job opportunities.

At present, it seems that this coercion has indeed had an effect, successfully attracting BYD. Of course, this is also a good thing for domestic electric vehicle companies represented by BYD.

Why Turkey?After the European Union imposed additional tariffs of up to 38.5% on Chinese electric vehicles, Turkey's strategic importance to domestic electric vehicle companies is self-evident.

On one hand, the current Turkish market includes 11 Chinese brands such as BYD, MG, and Chery. Just looking at last year, these brands sold approximately 60,000 vehicles in Turkey, capturing 6% of the Turkish market share. In the first half of 2024, this market share rose to 8%.

Simultaneously, according to data from the Turkish Automobile Distributors and Mobility Association, in the first half of this year, BYD sold 1,426 units in Turkey, while Chery Automobile sold 34,501 units. This indicates that the Turkish electric vehicle market still holds significant appeal for domestic electric vehicle companies.

On the other hand, Turkey itself is not a strong automotive country, taking on the production and manufacturing segment in the automotive industry chain. However, Turkey serves as a bridge connecting Asia and Europe, and as the seventh-largest trading partner, it has also signed a customs union agreement with the European Union, allowing electric vehicles and related components produced domestically to enter the European market tariff-free.

This means that domestic automakers can fully consider Turkey as a second Hungary, using it as a springboard to enter the European market.

The "BYDs" of the world are flexing their muscles in response.

Despite encountering "cold shoulders" in the United States and Europe, the actions of the "BYDs" of the world have never stopped looking for "warmth" in other overseas regions.

Recently, BYD officially announced an investment of $490 million to open its first electric vehicle factory in Thailand, and Chery's factory in Thailand is expected to start production in 2025. At the same time, BYD has taken over a former Ford Motor Company factory in Brazil and is scouting for factory locations in Mexico, while its first European automobile factory in Hungary is under construction.

Nowadays, the competition among domestic electric vehicle companies has become so fierce that it is "cutthroat," and the "BYDs" of the world's desire for overseas markets has reached its peak. It seems that even if the United States and Europe impose punitive tariffs, it will be difficult to stop the determination and courage of the "BYDs" to go global.

Thailand and Southeast Asia are just one of their global expansion footholds. From Uzbekistan to Hungary and then to Brazil, BYD alone has already spread its factories across Central Asia, Europe, and even South America.However, this trend is not necessarily detrimental to domestic automakers; in the long run, it is actually a prevailing trend. The automotive industry encompasses an extremely long industrial chain. In the past, American, European, and Japanese automobiles also achieved global development through a model of "industrial co-construction and shared benefits."

Now, in the era of new energy, it is not realistic for domestic automakers to dominate the entire industrial chain. Instead, going out and seeking opportunities for win-win cooperation with other players can lead to greater progress.