These Charts Show Alarms Going Off for Turkey's Car Industry

(Bloomberg) -- Demand for cars and light commercial vehicles in Turkey fell to the lowest for the month of April in four years. A series of indicators in the charts below show why: interest rates are surging, loans are dropping and vehicles priced in foreign currencies are getting a lot more expensive as the lira hits new lows.

Car and light commercial vehicle sales fell 6.4 percent in April to 71,126 units, according to the Automotive Distributors’ Association of Turkey, or ODD. That was the biggest April plunge since 2014, when demand for automobile loans was at an all-time high, according to data compiled by Bloomberg from the central bank.

The weighted average interest rate for motor vehicle loans has risen to 18.32 percent, the highest since 2009. The lira has weakened by about 60 percent against the dollar and euro since then.

“We see a risk of sudden stop in domestic demand depending on inventory levels if pressure on the lira continues,” Cemal Demirtas, an auto industry analyst at Ata Invest in Istanbul, said in an emailed note. “Ahead of elections on June 24, the financing environment could be less friendly if interest rates remain high and uncertainty for the rest of the year continues.”

Shares in some of Turkey’s biggest listed automakers are showing the stress. Tofas Turk Otomobil Fabrikasi AS, an equally-owned joint venture between Fiat Chrysler Automobiles NV and Koc Holding AS, fell 14 percent over the past 12 months, compared with an 11 percent gain in the benchmark Istanbul 100. Dogus Otomotiv Servis ve Ticaret AS, the distributor of Volkswagen AG cars in Turkey, dropped 18 percent. Ford Otomotiv Sanayi AS, owned by Koc and Ford Motor Co., is an exception because of its export orientation. Its shares have gained 49 percent.

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