Demand for vehicles on the Turkish market is weakening due to stubbornly high inflation and the latest stage in the weakening of the Turkish lira, with consumers cancelling orders for luxury cars, business daily Ekonomi has reported.

In the first half of the year, demand was strong as people turned to cars as an investment when real estate prices became prohibitively expensive. When the government intervened in the second-hand car market to introduce a price cap, demand was subdued.

Higher car prices and problems accessing car loans have also weighed on the car market.

Experts estimate that some 60% of cars were bought as an investment—purchased with the purpose of selling the vehicle at a higher price in the future—in the first half.

Amid strong demand, for the first time combined sales of passenger cars and light commercial vehicles (LCVs) reached as high as 556,000 units, a record for any January-June period. Representatives from the auto industry had anticipated that car sales would further accelerate as the end of the May election period eliminated uncertainties and that banks would make more cars loans available. They forecast 1mn vehicles sales in the whole of 2023.

But those expectations have not materialised.

“Car sales are ‘normalising’ after the central bank’s [rate tightening) moves,” Bulent Kilicer, general manager at Honda Turkey, told the daily.

Industry insiders expect around 100,000 car sales in July, noting that sales this month will not decline because of orders already placed. They, however, assess that the impact of the weak demand will be felt in August.