Sale of rump British motor manufacturer opens door for "Turkish" car

By bne IntelliNews May 5, 2014

David O'Byrne in Istanbul -


The apparent sale of BMC, the one-time Turkish subsidiary of the British Motor Corporation, has opened the door for the realisation of a long-term wish of Turkish Prime Minister Recep Tayyip Erdogan: the development of a "Turkish" car.

BMC was last week subject to a final bid of TRY751m (€257m) to ES Mali Yatırım ve Danismanlik, whose owner Ethem Sancak is known to be close to the Turkish prime minister.

Seized last year by Turkey's Savings Deposit Insurance Fund (TMSF) against $455m of debts from a bank belonging to its previous owner, Turkey's Cukurova Holding, BMC was offered for sale earlier this year with a reserve price of TRY985m (€340m). Although the sale price is considerably lower than the reserve one, the TMSF is expected to approve the sale.

The purchase represents a new departure for Sancak, who operates Turkey's biggest importer of drugs and medical supplies, and who last year bought newspapers Aksam and Skyturk 360 from the TMSF, after they too were seized from previous owners Cukurova.

Speaking to the media after the BMC sale announcement, Sancak confirmed his interest in building up a defence business (BMC also makes military vehicles) and that he is in talks with the Qatari government over the possible investment of TRY1bn into BMC.

British beginnings, made in Turkey

Founded in 1964 as a joint venture between local partners and The British Motor Corporation (later British Leyland) from which it takes its name, BMC is the third oldest of Turkey's 15 vehicle manufacturers.

Following Leyland's pullout in 1979, the company produced British-designed vehicles under license, and over the past two decades has developed its own range of light trucks and specialist commercial and military vehicles including the armoured "Kirpi" military transporter. But cash flow problems have seen production at BMC halted several times over the past year and the company last year failed to fulfil an order for 468 Kirpis with the Turkish defence ministry.

While the sale of BMC to a new owner should solve the short-term cash flow problems, it will also offer an opportunity for the company to fulfil a long-term ambition of Turkish Prime Minister Recep Tayyip Erdogan for the development of an all Turkish passenger car.

While BMC and other small manufacturers have both designed and produced specialist vehicles, to date all of the passenger cars and the mass production commercial vehicles produced in Turkey have been designed my major international manufacturers. Fiat, Renault, Hyundai, Toyota and Honda all produce passenger vehicles in Turkey, either with local partners or alone, while Ford, Mercedes Benz and Man produce commercial vehicles on the same terms and Turkey's Karsan produces light commercial vehicles and buses under license from a number of manufacturers.

Turkish manufacturers have been trying for over a decade to increase the level of local content in their vehicles and to boost their own R&D facilities helped by government incentive schemes, with projections indicating that the domestic vehicle market could top 1m vehicles by this year.

While PM Erdogan and other Turkish officials have been pushing for one or more to come up with an entirely Turkish model on the same lines as Malaysia's Proton, which can be sold both on domestic markets and internationally.

Media reports last year claimed that Turkish construction to energy group Calik, another group with close relations to Erdogan, were planning to buy BMC and develop a Turkish passenger car.

Calik denied the reports, however suggestions that the sale of BMC could result in the production of a Turkish car have continued. 

Officials from Sancak's companies declined to respond to questions from bne as to whether he has plans to develop such a vehicle. However his reported close relations to Erdogan suggest that such a venture will probably be raised.

Analysts, however, point out that such a venture would face an uphill struggle to be commercially viable. They point to weak demand for existing vehicle models from Turkey's key European markets and a recent increase in special consumption taxes that ramps-up the tax on a new car to a minimum of 45% of cost price, together with a new draft banking law which will limit automobile loans to a maximum of 70% of cost.

Hardly surprising then that figures produced by Turkey's Automobile Distributors Association (ODD) for the first quarter of the years show domestic sales of automobile and commercial vehicles falling 24.5% from 152,604 to 115,272.

No surprise either that current projections show the Turkish market is unlikely to reach the 1m vehicles being predicted a only a few years ago, with Mustafa Bayraktar the head of the ODD suggesting earlier this year that a figure of between 600-700,000 is more realistic.


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