Turkish auto market braces for slowdown after tax overhaul

ISTANBUL

After a record-breaking first half of the year, Türkiye’s auto market is preparing to hit the brakes following a major overhaul of the Special Consumption Tax (SCT) system.

The new tax regulation, which lowers prices by 5–10 percent for small vehicles but increases them across many other segments, is expected to lead to a shift in consumer behavior.

Industry experts warn that buyers may delay purchases, resulting in a temporary stagnation in sales. While electric vehicles (EVs) still enjoy a 25 percent SCT advantage, demand in this segment is also expected to slow before rebounding.

Industry representatives emphasized that demand for automobiles in the new period is expected to concentrate in the small car segment, while demand for C-segment SUVs, pickups and premium vehicles is likely to decline due to rising prices.

Executives from leading automotive brands expressed cautious optimism.

Mercedes-Benz Türkiye CEO Şükrü Bekdikhan noted that while some vehicles benefit from lower taxes, others — especially mid-range models — face unexpected price hikes.

“We expect a slowdown in consumer activity during the final quarter of the year, with sales likely to fall about 10 percent below the same period last year,” he said.

Hyundai Motor Türkiye’s General Manager Murat Berkel highlighted that changes in tax brackets have made A and B segment vehicles more affordable, predicting increased demand in these categories.

However, he warned that recent price hikes in C-SUV models could dampen enthusiasm. “We estimate the EV market will reach 180,000 units this year, an 80 percent growth, though the recent tax increase may temporarily impact momentum,” Berkel added.

Yüce Auto-Skoda Türkiye’s General Manager Zafer Başar echoed concerns about short-term stagnation, citing rising prices and limited access to credit.

He emphasized that demand will vary by segment and engine size, with consumers likely to observe the market before making decisions.

The new SCT system has particularly impacted pickup trucks and small electric vehicles.

Tax rates for 4x4 pickups jumped from 4 percent to 50 percent, pushing prices up by more than 50 percent. Meanwhile, some compact EVs now exceed 1.5 million Turkish Liras, making them less competitive.

Despite these challenges, industry leaders believe the market will stabilize in the medium term, especially as consumers adapt to the new pricing landscape and continue to seek value in lower-taxed models.

According to the Automotive Distributors and Mobility Association (ODMD), total vehicle sales in Türkiye for the first half of 2025 reached 607,977 units, including 488,003 passenger cars and 119,974 light commercial vehicles, marking a 5.2 percent year-on-year increase.