Sino-Turkish Competition and Cooperation in EV SectorIn this issue, we offer an analysis of Türkiye's recent restrictions on Chinese electric vehicle imports and the future of Sino-Turkish relations in this emerging sector.
Turkish electric car TOGG seen in Ankara, Türkiye, on
Jan. 3, 2024 (Xinhua/Mustafa Kaya)
Türkiye’s
foray into the electric vehicle (EV) industry, especially
with the establishment of national electric car manufacturer Togg,
has given rise to both collaboration and contrast with China.In this
analysis, we will delve into the economic ties between China and Türkiye before
exploring the birth of the Turkish EV sector. We will also examine the
partnerships formed between Chinese and Turkish EV companies, alongside the
measures being taken by Ankara to regulate the import of Chinese EVs. We will
then conclude by analyzing the motivations behind the Turkish government's
recent restrictions on Chinese EV imports, positing that these
actions are rooted in national interest rather than a mere response to Western
calls for “de-risking.”An
Overview of Sino-Turkish Economic Relations
In the
aftermath of the 2008 financial crisis, economic ties between Türkiye and China
developed rapidly. Chinese investments poured in, funding infrastructure,
energy and transportation projects across Türkiye. Notably, the stock of
Chinese foreign direct investment skyrocketed from a modest USD
386 million in 2009 to a substantial USD 3 billion
in 2022.Source: PRC Ministry of Finance
Türkiye's
decision to join the Belt and Road Initiative (BRI)in 2015 demonstrated its commitment to continue to align with China's global
infrastructure financing strategy. While this partnership yielded positive
results, recent years have seen mounting concerns in Türkiye regarding
the growing bilateral trade imbalance between the
two countries. According to ChinaMed Data, Türkiye
exported goods worth USD 4.5 billion to China in
2022, while its imports from the People’s Republic amounted to a
staggering USD 34 billion.Source: ITC Trade Map
Furthermore,
Turkish analysts and commentators have begun to voice growing
disillusionment over the perceived decline in Chinese infrastructure/BRI
investments, despite Türkiye’s central and strategic position between
Europe, the Middle East and the rest of Asia.[1] Moreover,
Turkish media began to publish articles on how Chinese enterprises
might outcompete their Turkish rivals in the Middle East and
North Africa, potentially jeopardizing Ankara’s ambitions to transform the
country into a regional supply chain hub.[2]Despite
these apprehensions, the Turkish government, led by President Recep
Tayyip Erdoğan, has taken proactive steps these past two years to
revitalize ties with China, such as by attempting to expand Türkiye’s
involvement in the Shanghai Cooperation Organization.[3] These
efforts may not only serve to balance out relations amid escalating tensions
between East and West, but also as an endeavor by Ankara to promote its
proposed “Middle Corridor” as the main BRI overland
route connecting China to the EU market, over the now politically complicated
northern route through the Russian Federation.[4] Ankara
may also be seeking Chinese support for its “Development Road” infrastructure
project as an alternative to the recently announced US-backed “India-Middle
East-Europe Economic Corridor”, which excludes Türkiye.[5]Another
significant driver behind Turkish overtures towards Beijing lies in its
aspirations to establish itself in emerging economic sectors where
China plays a leading role. These include industries related to the green transition,
such as renewable energy, nuclear power, batteries, and notably, electric
vehicles—the focus of our analysis.Introducing
Togg, the First Turkish Electric Car
Türkiye’s automotive industry currently
ranks as the world’s 14th largest, churning out 1.3
million vehicles annually. Nevertheless, despite several previous attempts, the industry has yet to
successfully establish a domestically designed and produced car brand.President
Erdoğan’s government has tried to breathe new life into Türkiye’s 60-year-old
dream of a national car line by launching a domestic automobile
initiative project. With the support of the Union of Chambers and
Commodity Exchanges of Türkiye, five Turkish companies came together with the
goal of designing and manufacturing 100% electric vehicles. The result
was Togg, short for Türkiye'nin Otomobili
Girişim Grubu (literally “Türkiye's Automobile Enterprise Group”),
which was founded on June 25, 2018.[6] Then
on the auspicious date of October 29, 2022 (99th anniversary of the founding of
the Turkish Republic), Togg’s first mass-production vehicle, the Togg T10X,
rolled off the line.[7]The
Turkish government has very actively promoted Togg. In
particular, President Erdoğan during his state trips abroad has gifted Togg
cars to fellow heads of state and of government including Hungarian Prime
Minister Victor Orbán, President of the UAE Sheikh Mohammed bin Zayed Al
Nahyan, President of Kazakhstan Kassym-Jomart Tokayev, Emir of Qatar Sheikh
Tamim bin Hamed Al Thani, Crown Prince of Saudi Arabia Mohammed bin Salman, and
President of Uzbekistan Şevket Mirziyoyev.[8] These
exchanges, accompanied by elaborate ceremonies featuring foreign leaders
sitting in or driving Togg vehicles, have the clear aim of generating local
interest in the Turkish EV.However,
while Togg has been presented and promoted as Türkiye’s flagship electric car
brand, China, as a global leader in the EV sector and battery production, plays
a role in its supply chain. In April 2023, to produce its automobiles’ battery
systems, Togg established the Siro Battery Development and
Production Campus, a joint venture with China-based lithium-ion
battery developer and manufacturer Farasis Energy.[9] The
USD 2.5 billion dollar investment in the municipality of Gemlik, Bursa
Province, is planned to manufacture 24 gigawatt-hour capacity battery cells and
19.8 gigawatt-hour capacity battery modules, employing 2,200 people.[10]Opportunities
and Challenges in Türkiye for Chinese EV Brands
Despite
these collaborative efforts,China’s dominance in the EV sector
has raised concerns in Türkiye. Turkish media increasingly portray the
growing availability of Chinese automotive brands, such as Hongqi, MG, Chery
and BYD as either fostering “rising competition” against local car
manufacturers, or, in more dramatic terms, as an outright “invasion”.[11] Additionally,
many commentators have noted that a continued surge in Chinese EV imports would
continue to exacerbate Türkiye’s ever-growing trade imbalance with China.It is
within this context that in March 2023,Türkiye raised import
duties on Chinese EV brands by 40%, culminating in a total tariff of
50%.[12] This
coincidentally occurred right after BYD signed a memorandum of understanding
with Turkish distributor ALJ Türkiye to enter the Turkish market.[13] The
motivations behind this tariff escalation appear twofold: firstly, Ankara's
aim to shield Togg from Chinese competition, and secondly, to
encourage Chinese EV manufacturers to establish local production facilities in
Türkiye.Irrespective
of the intentions, this tariff hike has not been met with enthusiasm from
Chinese officials and the business community. On May 18, 2023,Chinese
Ambassador to Türkiye Liu Shaobin contended that Türkiye's
imposition of a 40% additional custom duty on Chinese EVs, while applying
10-20% custom duty and no tariffs on imports from other World Trade
Organization (WTO) member states, constitutes a discriminatory trade protection
measure that does “not comply with the spirit of common trade
between the two countries”.[14] Nevertheless,
it is worth noting that in the same interview, Ambassador Liu lauded the Siro
Battery Campus as an example of Sino-Turkish cooperation, welcomed Türkiye’s
progress in the EV sector, and expressed his “hope that the Turkish side can cooperate
with the Chinese side with a common spirit”.[15]Criticism
of this tariff also arises from within Türkiye. According toGazete Pencere journalist Emre
Özpeynirci, “Türkiye is missing out on a historic investment
opportunity due to its decision” as it has driven Chinese manufacturers,
especially SAIC, interested in producing electric vehicles for the EU market in
Türkiye, to explore other options.[16]What does
2024 have in store for Chinese EVs in Türkiye?
In
December 2023,the Turkish government introduced new criteria for
the import of EVs with the purported goal of ensuring customer
safety, increasing after-sales service quality, and streamlining battery
recycling processes. Under these new regulations, companies seeking to import
EVs must to apply for permission and fulfill the subsequent criteria:●
Certification from the Turkish authorities that at least 20 authorized service
stations in 7 Turkish regions have been established for after-sales assembly,
maintenance and repair of imported EVs.
●
Persons responsible for the purchase, sale, maintenance and repair of EVs must
have a qualification certificate from the Turkish authorities for the purchase,
sale, maintenance and repair of electric EVs.
●
Able to provide service through a Turkish call center located in Türkiye with
at least 40 personnel for each brand.
●
Have an authorized representative resident in the country.
●
Present a written statement accepting the procedures that need to be carried
out regarding the monitoring, control and inspection of battery systems.[17]
Local
media speculated that the implementation of these “impossible”
regulations aim to safeguard Togg,
President Erdoğan’s “favorite project”.[18] On
the other hand, these rather burdensome new rules have been interpreted by
international analysts as Türkiye following in the footsteps of
the European Commission, which started a probe last October on Chinese EV
firms, accusing them of “dumping” subsidized vehicles.[19] These
new rules also follow reports of a record USD 184 million in
Chinese EV imports during the first ten months of 2023, double
the value for the entire 2022 despite the tariff hike.[20]In a
comment toBloomberg, general manager of BYD Türkiye Ismail
Ergun warned that “if the rule is implemented as planned, imports
may have to wait at the border for months” potentially delaying the Turkish
release of BYD's SEAL and HAN models.[21] However,
these regulations may not necessarily indicate hostility toward Chinese
products or Chinese commercial influence; they could be a strategic move to
encourage Chinese automotive companies to establish EV production plants in Türkiye. Minister
of Industry and Technology Mehmet Fatih Kacır expressed this wish
during his recent visit to China.During
this multi-day visit, which began on December 20, 2023 (three weeks after the
introduction of the EV import regulations), Minister Kacır visited eight
Chinese cities, met with China’sMinister of Science and
Technology Yin Hejun and Minister of Industry and
Information Technology Jin Zhuanglong, and, notably for our
analysis, toured the Chinese EV firms GAC, BYD and Chery.[22]On
December 22, Minister Kacırtook to X, the platform formerly known as
Twitter, to share his discussions with Chinese industry leaders during which he
extolled Türkiye as the “right location for global investments”. He also
discussed “investment opportunities in our country for Chinese
automotive and battery companies”, how “Turkish and Chinese companies
can cooperate more comprehensively in the field of technology and innovation”,
and how “the centuries-old friendship between Türkiye and China creates a solid
foundation for the success stories we will create together in the field of
industry and technology”.Despite
Kacır’sexpressed aspiration to
turn Türkiye into a Chinese EV production hub, his trip did little to
prevent BYD confirming its plans to establish its inaugural
European EV production facility in Szeged, Hungary.[23] It
is worth noting that the 40% tariff hike and new regulations do
not apply to EVs imported from the EU, thus allowing BYD vehicles
manufactured in Hungary to sidestep Ankara’s restrictions.While
BYD’s choice to construct its first European factory in Hungary may be due to
the Chinese EV giant already having a bus facility in the country, the intense
lobbying effort by Türkiye and other states leading up to this decision
underscore the heightened competition not only among manufacturers
but also among nations vying for these strategic investments.A final
consideration is that the Turkish automotive industry primarily targets the
European market and Togg aims to establish itself as a major EV brand in the
EU. With BYD now located in Hungary, the future of Sino-Turkish
relations in the EV sector could become even more competitive, rather than
collaborative, in the future.Conclusion
While the
EV sector is one marked by growing cooperation between Türkiye and China, exemplified
by the Siro Battery Campus, it is also an industry that is characterized
by increasing competition. National governments are scrambling to
corner this strategic market, especially in the context of the global shift
towards EVs due to regulatory changes, such as the EU’s new law obliging zero
CO2 emissions from cars starting in 2035.While
Chinese EV firms hold a significant advantage, international commentators
foresee potential challenges for states with existing trade imbalances with
China. Türkiye's decision to restrict Chinese EV imports should not be viewed
merely as aligning with Western "de-risking" against China, but
rather as a strategic move to carve out a role in the developing
EV supply chain and establish more balanced Sino-Turkish trade relations.This also aligns with Ankara’s ambition to develop its own domestic
EV industry.[24]The
imposition of tariffs and regulations by Türkiye also reflects a
broader trend of countries safeguarding their geoeconomic positions,
revealing a growing weakness in the free trade regime upheld by the WTO.
Indeed, Türkiye's actions are not isolated; the EU's recent probe into Chinese
EV dumping is linked to France's explicit desire for
Chinese battery and electric car firms to invest in the country.While
Hungary, with its alignment with Beijing on political issues within the EU,
successfully secured a major Chinese EV investment, it is yet to be seen if
Türkiye’s more direct approach of pushing Chinese firms to localize production
in Türkiye will bring in similar results.[1] Türkiye-Çin
İlişkileri: Ankara’nın hayalleri ve karşılanmayan yatırım beklentileri
[Türkiye-China Relations: Ankara's dreams and unmet investment
expectations], Politik Yol, 16 April, 2023, link.[2] Hazır
giyimde yeni tehdit Kuzey Afrika [A new threat in North African clothing
sector], Dünya Gazetesi, October 5, 2022, link.[3] Çin-Türkiye
ilişkileri "hibernasyon" dan çıkıyor [China-Türkiye relations exit
"hibernation"], T24, July 24, 2023, link; Turkey's Erdogan targets joining
Shanghai Cooperation Organisation, media reports say, Reuters,
September 17, 2022, link.[4] Türkiye’s
Multilateral Transportation Policy, Republic of Türkiye Ministry of
Foreign Affairs, accessed on January 9, 2023, link; Bakan Uraloğlu: Orta Koridor'un
önemi her geçen gün artıyor [Minister Uraloğlu: The importance of the Middle
Corridor is increasing day by day], Hürriyet Gazetesi, September
15, 2023, link.[5] Mehmet
Alaca, Haydar Karaalp, Türkiye-Iraq Development Road Project: Enhancing
regional connectivity, trade, Anadolu Ajansı, September 17,
2023, link.[6] Kader
İbici, Naz İrem Üstündağ & İlyas Umut Özacar, Devrim’den TOGG’a Türkiye’nin
otomobil serüveni [Türkiye's automobile adventure from the Devrim to
TOGG], TRT, March 10, 2023, link.[7] 61
yıl sonra aynı yerde: Togg, Devrim otomobili gibi TBMM'de görücüye çıktı [The
same place after 61 years: Togg was unveiled at the Turkish Grand National
Assembly like the Devrim car], TRT, December 12, 2022, link.[8] Mümin
Altaş, Turkish president gifts Togg to Saudi crown prince, Anadolu
Ajansı, July 18, 2023, link; Erdoğan, bir yabancı lidere daha
Togg hediye etti [Erdoğan gifted a Togg to another foreign leader], Sozcu
Gazetesi, November 3, 2023, link[9] Türkiye’nin
Yenilenebilir Rekabet Gücü [Türkiye's Renewable Competitiveness], SETA,
October 6, 2023, link.[10] Zeynep
Canlı, Türkiye'nin ilk otomobil batarya fabrikası Bursa'nın Gemlik ilçesinde
kuruluyor [Türkiye's first automobile battery factory is being established in
Bursa's Gemlik district], Anadolu Ajansı, December 18,
2021, link.[11] Murat
Sahin, Otomotiv pazarında Çin rüzgarı: Kimine göre istila, kimine göre rekabet
artışı [Chinese wind in the automotive market: Invasion for some, increase in
competition for others], NTV, November 27, 2023, link.[12] Karar
Sayısı: 6886 [Decision number 6886], Resmi Gazete, March 2,
2023, link; ‘Türk seddi’ Çin’de gündem: Çin
menşeili elektrikli araçlara yüzde 40 ek vergi getirilmesini tartışıyorlar [The
‘Turkish Great Wall’ is on the agenda in China: They are discussing the 40
percent additional tax on electric vehicles of Chinese origin], Hürriyet
Gazetesi, 9 March, 2023, link.[13] BYD
joins forces with ALJ Türkiye as the Distributor for Türkiye, BYD,
March 1, 2023, link.[14] Çin'den
kritik Türkiye açıklaması! [Critical statement on Türkiye from China!], Aksam
Gazetesi, May 18, 2023, link.[16] Emre
Özpeynirci, Tarihi yatırım fırsatı kaçmasın! [Don't miss the historical
investment opportunity!], Gazete Pencere, July 3, 2023, link.[17] Ministry
of Commerce, BAZI ELEKTRİKLİ ARAÇLARIN İTHALİNE İLİŞKİN TEBLİĞ [NOTIFICATION ON
IMPORT OF SOME ELECTRIC VEHICLES, Resmi Gazete, November 29,
2023, link.[18] Savaskan
Iskefli, İthalat kararı Togg için mi alındı? Yurtdışında tebliğ 'imkânsız'
sözleriyle eleştirildi [Was the import decision made for Togg? Notification
abroad was criticized as 'impossible'], Cumhuriyet Gazetesi,
December 16, 2023, link.[19] Taylan
Bilgic & Firat Kozok, Turkey Moves to Counter Rising Tide of Chinese EV
Imports, Bloomberg, December 9, 2023, link; Elizabeth Cooke, Signal: Turkey
joins EU in cracking down on Chinese EV imports, JustAuto,
December 13, 2023, link.[20] Cooke,
Signal: Turkey joins EU in cracking down on Chinese EV imports.[21] Bilgic
& Kozok, Turkey Moves to Counter Rising Tide of Chinese EV Imports.[22] Emre
Aytekin, Sanayi ve Teknoloji Bakanı Kacır, Çin'de teknoloji ve inovasyon
işbirliğini ele aldı [Minister of Industry and Technology Kacır discussed
technology and innovation cooperation in China], Anadolu Ajansı,
December 21, 2023, link.[23] Justin
Spike, China’s BYD to build its first European electric vehicle factory in
Hungary, Associated Press, December 22, 2023, link.[24] Türkiye's
new domestic electric vehicle expected to hit road in 2024, Daily
Sabah, January 2, 2024, link.
Author | Ahmet Faruk IŞIK, DTİK China Consultant at Foreign Economic Relations Board of Türkiye (DEIK), Ph.D. Candidate at comparative politics and area studies, Shanghai International Studies University and research assistant of Shanghai Academy of Global Governance and Area Studies (SAGGAS). Leonardo Bruni, research fellow at the ChinaMed Project and the University of Milan, graduate of the Sciences Po-Peking University Dual Master’s Degree in International Relations and International Development and holds a B.A. in International Relations and Diplomatic Affairs from the University of Bologna.Source | ChinaMed Project,11 Jan, 2024.