“I do not foresee any more problems in 2005,” says Ibrahim Aybar, head of MAIS, a second joint venture set up to market the Renault brand in Turkey. “With EU accession hopefully on the horizon, we expect our franchise to get stronger and stronger.”
In the wake of the economic disasters of 2001– including a major earthquake, the business consequences of 9/11 and the devaluation of the Turkish lira – the joint ventures have nonetheless emerged strongly fortified against Turkey’s past political and economic volatility.
Mr Aybar’s statement marks a general optimism in the Turkish automotive market, which recorded a landmark year in 2004 with production and export levels reaching all-time highs.
Many would look to the prospect of EU membership in 2015 coupled with increased political stability from the ruling Justice and Development Party (AKP) to explain this. But the ongoing success of a mature partnership such as this is more deeply rooted. While Oyak is a well-known and highly-respected presence for potential car-buyers in the domestic market, Renault is an internationally-recognised brand for the export side of the business.
The MAIS and Oyak Renault joint ventures are therefore well perceived by both their Turkish and French investors.
Such a genuinely bilateral arrangement seems a rarity in light of traditional structures for collaborative manufacturing partnerships, which are often offshoring exercises by Western companies to take advantage of the low-cost workforces in emerging markets and their proximity to high-growth neighbours. But, although Turkey’s geographical location is ideal as a hub of manufacturing – a gateway to the Middle East and north Africa as well as western, central and eastern Europe – the strategic alliance at the heart of the joint venture has been the real driver of its success.
Renault has now consolidated its lead in the Turkish market as the country’s best-selling passenger car and light goods vehicle exporter. And the Oyak conglomerate has attracted attention in the EU via its association with the French brand, both in terms of attracting foreign investment and other joint ventures. The latter include a further partnership with French insurance giant AXA and one with Steag, a German power company. At the core of Oyak lie its origins as Turkey’s largest pension fund, meaning profitability derived from these joint ventures is used for the same original purpose: guaranteeing strong returns for its members.
A core difference between this partnership and the other joint ventures springing up across Turkey is its age. And the MAIS marketing joint venture headed by Mr Aybar was there from the start, created to exploit Renault’s brand as well as Oyak’s domestic reputation. This reputation is a major selling point for MAIS’s efforts to attract Turkey’s reluctant car-buying public.
“Turks are more likely to buy home-made cars,” says Mr Aybar. “And following 35 years on the Turkish car market, this brand is now seen as indigenous.”
Proof came last year when MAIS achieved a 19% market share for domestically-built Renaults in Turkey, compared with the 11.5% of its nearest competitor. The overall production and export figures are equally impressive. Last year’s sales for the two best selling models, the Clio and the Mégane, reached 160,000, a 100% increase on 2003’s sales.
That did not surprise Mr Aybar. “That’s the sort of volume that we would have expected,” he says. “If it wasn’t for a sluggish market resulting from the state of the economy at the beginning of the millennium, we would expect that volume year-on-year.”
What bolstered Oyak Renault against the pitfalls of Turkey’s economy was its export-led business. The Turkish public views cars as luxury goods, making this one of the first sectors to be hit during times of macroeconomic stress. This is why Oyak Renault’s export strength is so central to economic success. Exports make up 80% of total production, with passenger cars and light commercial vehicles being exported to 100 countries on five continents. A second shift will soon be introduced at the Bursa facility, increasing capacity by 100% to more than 700 vehicles a day.
Turkey’s low rate of car ownership – 69 out of 1000 Turks own cars – is a key component of the company’s expansion plans and will complement the planned increase in capacity. With the incentives in government legislation geared up to boost domestic sales by introducing special tax rebates for drivers, the Turkish consumer market for cars looks set to flourish.
In addition to the company’s history of success, Mr Aybar believes that Turkey’s current political climate is a further key to opening up Renault MAIS’s penetration of the stagnant domestic market. “Just after the general election that brought in the AK Party, we saw a kick-start in sales,” he explains. “An increase in political stability has meant that the economy is less volatile, with less political influence on the automotive industry and also Turkey’s wider economic trends.”
This more open and entrepreneurial economy will help to drive Oyak Renault towards even greater competitiveness. There are already 41 automobile brands available in Turkey, a number that has been increasing steadily since Turkey’s entrance into the EU Customs Union in 1996.
“The country is very much in the process of change,” says Mr Aybar. “With the promise of further cross-border deregulation and liberalisation, the momentum of trade between Turkey and the EU will pick up rapidly.”
Markets to tap
Despite Oyak Renault’s success hinging on its presence in the international export market, there are foreign markets that remain untapped. The factory at Bursa has easy access to markets in the central Asian republics, the Gulf states and the Middle East. Its other neighbours, Russia, Bulgaria and Romania, are yet to be exploited, but this remains dependent on the status of the domestic automotive markets there, which are still crippled by low consumer spending power.
Most crucial to Oyak Renault’s expansion plans and MAIS’s marketing strategies is maintaining market share against increasingly ferocious competition. The joint strategy is to continue consolidation of Oyak Renault’s supply chain and international distribution capabilities, as well as MAIS’s strong network of local dealerships. Together, these should allow the overall partnership to meet increased domestic and foreign demand with its capacity increases.
Oyak Renault and MAIS are now veteran partners and their partnership heralds a new wave of industrial and commercial collaborations to connect eastern and western markets. Their brand alone should carry serious weight for Turkey’s manufacturing capabilities in the wider EU arena, especially in the run-up to accession negotiations.
The only possible cloud is economic volatility in Turkey, about which Mr Aybar is sanguine. “No, I do not see any further crises,” he says. “This is the dawn of a more dynamic age for Turkey.”