Hourly wage hikes lead to layoffs in the automotive sector
As part of the agreement reached between the Turkish Metal Union and the Turkish Employers' Association of Metal Industries (MESS), the hourly wages of workers in the metal sector were increased by 21.30 percent as of September 1. It was also decided to apply a 51.97 percent increase to social benefits. Following these developments, layoffs have begun, particularly in major automotive main industry and large supply industry firms.
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Automotive industry representatives, stating that the contraction in the economy and financial difficulties will have a greater impact on both automobile sales and export figures in the coming period, note that the uncertainty regarding when this process will end is unsettling the sector. So much so that Tofaş Automobile Factory informed its employees last week that it had reduced the number of shifts to 1.
On the other hand, while industrial production in Turkey is declining, the automotive industry is recording an increase in its production in Eastern Europe. Many of the large supply industries that have completed their investments and started production in Eastern Europe have now opened their facilities, which they previously used only as assembly lines, to production as well. This makes the competitiveness of the Turkish automotive industry debatable. This situation in the automotive sector is also observed predominantly in the Turkish mold industry. The efforts of mold manufacturers to reduce costs in order to secure projects have caused mold production to shift largely to Chinese mold makers.
'WE USE CHINESE MOLD MAKERS TO MEET COSTS'
According to the report by Esra Özarfat from Ekonomim, mold makers, stating that mold production in Turkey is more expensive than in Portugal, assess the situation as follows: “Our orders from Europe were canceled and shifted to Portugal. We are forced to use Chinese mold makers as subcontractors to lower the average and meet costs; otherwise, we cannot get work. The mold factories in Portugal had closed for a period, but now they are opening one by one. Labor costs in Turkey are 2 thousand Euros. There, the minimum wage is 850 euros. It is entirely about costs. Foreign currency is cheap in Turkey.” It is also stated that some large supply firms have stopped production in their mold shops.
According to data from the Uludağ Automotive Industry Exporters' Association (OİB), the Turkish automotive sector's exports in August declined by 0.4 percent compared to the same period last year. The sector, which maintains its first-place position in Turkey's exports, also held a 12.3 percent share.
EXPORTS ROSE TO 1 BILLION 214 MILLION DOLLARS
Mentioning that production in the automotive industry is paused in August due to planned maintenance and repair work, OİB Chairman of the Board Baran Çelik said, “Despite this, we exceeded the August averages in exports last month. We recorded double-digit growth in motor vehicles for the transport of goods and bus-minibus-midibus product groups. There were export increases of 24 percent to the United Kingdom, one of our most important markets, 116 percent to Slovenia, and 108 percent to Romania. Our Turkish automotive industry's exports for the January-August period reached 23 billion 531 million dollars, an increase of 3.4 percent compared to the same period last year.”
In August, the exports of the supply industry, which is the largest product group, increased by 3 percent to 1 billion 214 million dollars.
Stating that industrialists are calculating for maximum efficiency, Çelik said, “Currently, everyone except for a few OEMs is losing money. It is difficult to understand where the process will stop. The automotive industry is caught in a pincer of cost and competition. Manufacturers are not updating product prices due to the exchange rate. They are also suffering from the inflationary environment the country is in. Even though inflation has slowed down a bit, the damage seen so far is incredible. Losing strength in the domestic market also negatively affects exports. SMEs cannot access finance. The cost of money is very high.”
'WE FORESEE LOCALIZATION ABOVE 51 PERCENT'
Stating that they always look positively at a new investment or capacity creation in Turkey, Baran Çelik evaluated the investment of the Chinese company BYD as follows:
“Localization rates are important here. If the localization rate is below a certain figure, I think the incentive will not work. But there may be an increase in the localization rate within a certain plan. We do not know this. Ultimately, we foresee them reaching a localization rate of over 51 percent. We see that negotiations are ongoing with large foreign supply industries that currently produce important electronic parts. However, no agreement has been reached in the metal branch yet. We think that as competitiveness is established over time, the metal branch will also be included in the business. We also hear rumors that investment negotiations are ongoing with another Chinese firm. Turkey is an important market for the automotive industry.”