AUTOMOTIVE INDUSTRY ANALYSIS REPORT and GUIDE

TR33 REGION(Afyonkarahisar, Kütahya, Manisa, Uşak)

AUTOMOTIVE INDUSTRYANALYSIS REPORT

and GUIDE

COVID-19 Crisis Responseand Resilience Project

AUTOMOTIVE SECTOR ANALYSIS REPORT AND GUIDE

TR33 Region (Afyonkarahisar, Kütahya, Manisa, Uşak)

ISBN:© All rights reserved. R.T. Ministry of Industry and Technology General Directorate of Development Agencies, June 2021, Ankara.Reproduction of this publication for educational or other non-commercial purposes is authorized without prior written permission from the copyright holder provided the source is fully acknowledged. Reproduction of this publication for resale or other commercial purposes is prohibited without prior written permission of the copyright holders.

R.T. Ministry of Industry and Technology General Directorate of Development AgenciesAdress: Mustafa Kemal Mahallesi Dumlupınar Bulvarı, 2151. Cad. No: 154/A, 06510 Çankaya,AnkaraTel: 0 (312) 201 50 00www.sanayi.gov.tr

Project Team:R.T. Ministry of Industry and Technology General Directorate of Development AgenciesAhmet Şimşek, Head of DepartmentDr. Mehmet Emin Özsan, ExpertDr. Onur Karakurt, ExpertEda Doğan, ExpertAhmet Alıcı, ExpertFatma Avşar, MARKA, ExpertCandan Umut Özden, MARKA, Head of Unit

UNDP TurkeyMustafa Ali Yurdupak, Inclusive and Sustainable Growth Portfolio ManagerArzu Karaarslan Azizoğlu, Local Economic Development Projects ManagerAslı Aygün Gürsoy, Project AssistantZeynepsu Gülek, Project InternDeniz Şilliler Tapan, Project Communication Expert

Development Agencies Working Group Members for Automotive Sector:Cem BayrakYusuf ÖztaşFaruk ErYasin DalgıçBurak CanbulatElif ZeytinMustafa Coşkun

Prepared by: Dr. Hamdi Giray Reşat

Design: Carnavale Ad&Pr

For citation: Automotive Sector Analysis Report and Guide TR33 Region (Afyonkarahisar, Kütahya, Manisa, Uşak); R.T. Ministry of Industry and Technology General Directorate of Development Agencies, 2021, Ankara, TurkeyAutomotive Sector Analysis Report and Guide was prepared within the scope of the "COVID-19 Resilience and Response Project" financed by the Government of Japan, carried out by the United Nations Development Program (UNDP) in cooperation with the General Directorate of Development Agencies of the Ministry of Industry and Technology. This report is one of the 25 Region-Based Fragile Sector Reports prepared within the scope of the project.

TR33 REGION(Afyonkarahisar, Kütahya, Manisa, Uşak)

AUTOMOTIVE INDUSTRYANALYSIS REPORT

and GUIDE

COVID-19 Crisis Responseand Resilience Project

i

Contents iiiList of Tables vList of Figures viAbbreviations viiExecutive Summary ix1 Introduction 12 Methodology 33 Automotive Industry Profile 7 3.1 General Outlook of the Automotive Industry in the World 7

3.2 Overview of the Automotive Industry in Turkey 10

3.3 Overview of the Automotive Industry in TR33 Region 12

4 Effects of COVID-19 Outbreak on the Automotive Industry 155 Trends Specific to the Automotive Industry 20 5.1 Special Trends in the Automotive Industry in the World 20

5.2 Industrial Trends in Turkey 24

5.3 Industrial Trends in TR33 Region 26

6 The Current State of the Automotive Industry 29 6.1 Primary Research Results 29

6.1.1 Survey Study 29

6.1.2 Focus Group Meeting 35

6.2 Industrial Analysis 37 6.2.1 Value Chain Analysis for the Automotive Industry in TR33 Region 37

6.2.2 TR33 Region Automotive Industry PESTLE Analysis 38

6.2.3 SWOT Analysis for the Automotive Industry in TR33 Region 40

6.2.4 Five Power Analysis for the Automotive Industry in TR33 Region 41

6.3 Gap Analysis for the Automotive Industry in TR33 Region 44

7 Horizontal Issues 48 7.1 Crisis Management 48

7.2 Resource Efficiency 48

7.3 Climate Change 49

7.4 Gender Equality 50

8 Short, Medium and Long Term Strategies and Action Plans 529 Policy Recommendations 7110 TR33 Region Automotive Industry Analysis Summary 7411 Conclusion and Evaluation 76References 79Annexes 82 Annex 1. TR33 Region Focus Group Meeting Participant List 82

Annex-2. TR33 Region Automotive Industry R&D Centers List 83

Annex-3. List of Products Planned to be Supported under HAMLE Program 84

CONTENTS

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Table 1. Companies and Employment Numbers According to TR33 Region Sub-NACE Codes based on Provinces 12Table 2. Summary Table of Investment Incentive Documents Given in the Field of Motor Vehicles in TR33 Region 14Table 3. Short-Term (0-1 Year) Effects of the COVID-19 Outbreak on the Automotive Industry 15Table 4. Medium-Term (1-3 Years) Effects of the COVID-19 Outbreak on the Automotive Industry 18Table 5. Global Trends in the Automotive Industry 21Table 6. Turkey Automotive Industry Trends 24Table 7. TR33 Region Automotive Industry Trends 26Table 8. Distribution of TR33 Region Surveys Based on Sub Sectors 29Table 9. PESTLE Matrix of TR33 Region 39Table 10. SWOT Matrix of TR33 Region 40Table 11. Gap Analysis of TR33 Region 44Table 12. TR33 Region Automotive Industry Strategy and Action Table 54

TABLES

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Figure 1. Work Flow Chart 3Figure 2. Regional Distribution based on Global Automotive Industry Export Capacities [Trademap, 2021] 7Figure 3. World Vehicle Sales Volumes [OICA, 2020a] 8Figure 4. World Vehicle Production Volumes [OICA, 2020b] 8Figure 5. Turkey Vehicle Production Numbers [OSD, 2020] 11Figure 6. Overview of the Automotive Industry in TR33 Region 12Figure 7. TR33 Region Foreign Trade Volumes [TurkStat, 2020c] 13Figure 8. Timeline of Industrial Trends 21Figure 9. Export Status and Company Structure of the Companies Participating in the Survey 30Figure 10. Problems Encountered During the COVID-19 Outbreak 30Figure 11. Major Barriers and Bottlenecks Affecting Business the Most 31Figure 12. Problems in Raw Material Supply Processes 31Figure 13. Short-Term Actions/Expectations of Companies 32Figure 14. Risk Factors Affecting Sustainability 32Figure 15. Factors Affecting the Level of Competition 33Figure 16. Transformation Activities of Companies 33Figure 17. Future Strategies of the Companies 34Figure 18. General Value Chain Flow of the Automotive Industry 37Figure 19. Porter 5G Relation Matrix 43Figure 20. Regional Gap Analysis 47Figure 21. Positioning Actions in Different Spaces and Time Intervals 52

FIGURES

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EU European Union

USA United States of America

ADR European Agreement concerning the International Carriage of Dangerous Goods by Road

AHIKA Ahiler Development Agency

AR/VR Augmented Reality / Virtual Reality

R&D Research and Development

BEBKA Bursa, Eskişehir and Bilecik Development Agency

UN United Nations

CE Conformity to Europe

CRM Customer Relationship Management

ERP Enterprise Resource Planning

SWOT Strong, Weak, Opportunity and Threat

IPA Instrument for Pre-Accession Assistance

ISO International Standard Organization

IT Information Technologies

ITS Intelligent Transportation Systems

JV Joint Venture

VAT Value Added Tax

SME Small and Medium Enterprises

KOSGEB T.C. Küçük ve Orta Ölçekli İşletmeleri Geliştirme ve Destekleme İdaresi Başkanlığı (TR Small and Medium

Enterprises Development and Support Administration)

M&A Mergers and Acquisitions

MARKA Doğu Marmara Kalkınma Ajansı (East Marmara Development Agency)

MES Manufacturing Execution System

MÜSİAD MIndependent Industrialists' and Businessmen's Association

NACE Statistical Classification of Economic Activities in the European Community

NAFTA North American Free Trade Agreement

ODD Automotive Distributors Association

OECD Organization for Economic Co-operation and Development

OEM Original Equipment Manufacturer

OIZ Organized Industrial Zone

OIA Automotive Industry Association

OAS Automotive After Sales Products and Services Association

SCT Special Consumption Tax

PESTLE Political, Economic, Social, Technological, Legal and Environmental

SDG Sustainable Development Goals

NGO Non Governmental Organization

TAYSAD Vehicle Supply Manufacturers Association

CBRT Central Bank of the Republic of Turkey

TOBB Turkey Union of Chambers and Commodity Exchanges

TOGG Turkey's Automobile Enterprise Group

TSO Chamber of Commerce and Industry

TUBITAK Scientific and Technological Research Council of Turkey

TurkStat Turkey Statistical Institute

TÜRKAK Türk Akreditasyon Kurumu (Turkish Accreditation Agency)

TÜSİAD Turkish Industrialists' and Businessmen's Association

ABBREVIATIONS

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UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Program

SEIC Supporting the Enhancement of International Competitiveness

V2I Vehicle to Infrastructure Communication

V2V Vehicle to Vehicle Communication

V2X Vehicle to Everything Communication

VMI Vendor Managed Inventory

WEF World Economic Forum

WHO World Health Organization

WTO World Trade Organization

ZAFER Zafer Development Agency

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The COVID-19 pandemic has gone beyond a health crisis and turned into a global problem, due to its impacts felt in all areas of life and all over the world. It is obvious that the problems caused by the pandemic, which has turned into a serious threat to all humanity, can be solved with a sustainable and fair understanding that requires international solidarity, cooperation, and common solution ideas.

The restrictions applied as a necessity of the pandemic led to slowdown in production, decrease in labor supply, delay in the supply

of intermediate goods and raw materials, and increased logistics costs in our country as well as all over the world. Therefore, it is essential for sustainable development that policies should focus on the fragile sectors most affected by the pandemic in order to ensure the continuity of economic activities and accelerate the recovery.

By closely following the changes observed in the global system, Turkey carries out a comprehensive transformation in every field from education to health, from manufacturing industry to tourism, from industrial zones to research infrastructures.

Our development agencies, which perform their activities under the coordination of the Ministry of Industry and Technology, carry out studies at the regional level in order to reduce the negative impacts of COVID-19 on the national and regional economies and to identify the sectors most affected by the pandemic. One of our works in this field is the Government of Japan funded COVID-19 Resilience and Response Project, which we have implemented together with the United Nations Development Program (UNDP), the General Directorate of Development Agencies, and our development agencies.

Within the scope of the project, 25 region-based “fragile sector analysis reports” were prepared in the textile, logistics, food, machinery, and automotive sectors, which are of key importance for the Turkish economy. These reports, taking into account global developments and trends, offer new policy recommendations that will increase the resilience of the relevant sectors against crises. In addition, the “New Market Analysis” and “Product Space Analysis” reports, which cover studies to increase the export potential of enterprises operating in fragile sectors, were also completed within the project. These reports aimed to create road maps to support the business continuity of fragile sectors and to prevent supply chain disruptions.

We believe that the policy recommendations in these reports, which are in line with the targets within the framework of our national technology move, will support inclusive and sustainable development; it will carry Turkey to a more strategic point in the international trade and investment decisions that will be reshaped in the post-COVID-19 period and will contribute to our country's 2023 goals.

I would like to thank the Government of Japan for their generous contribution to mitigating the economic impact of the COVID-19 crisis, ensuring economic recovery, strengthening sectors, and transforming SMEs in this process.

I congratulate all our stakeholders, particularly UNDP Turkey management and project team, and the employees of the Development Agencies General Directorate and development agencies, who have made these studies realised and turn them into concrete outputs, and I hope that the reports will contribute to the future of our country.

Mustafa Varank

Republic of Turkey Minister of Industry and Technology

FOREWORD

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The global context for development has fundamentally changed with the COVID-19 pandemic. The pandemic created many new obstacles to overcome as well as new problems to be solved. Although COVID-19 started as a health crisis, it has turned into both a humanitarian crisis and a development crisis. This unprecedented crisis is pushing millions of people into extreme poverty, changing and widening existing inequalities, and disrupting progress towards the Sustainable Development Goals (SDGs). Therefore, the SDGs are now more important than ever. The 2030 Agenda remains the only option for a more prosperous future for people and planet.The COVID-19 pandemic has also shaken the global trade and development landscape. The global health emergency turned into a global economic shock with its impacts on growth, international trade, investments, global production, value chains, employment and eventually livelihoods of people. UNDP is responding to a growing volume of requests from countries to help them prepare for, respond to, and recover from the COVID-19 pandemic with a particular focus on the most vulnerable. As of now our focus is to help decision-makers look beyond COVID-19 recovery, towards 2030, making choices and managing complexity and uncertainty in four key areas: governance, social protection, green economy, and digital disruption. UNDP’s COVID-19 Resilience and Response Project, which is funded by the Government of Japan is a part of our rapidly developed integrated response to the COVID-19 health, humanitarian, and development crisis. Being complementary with the efforts of the Government of Turkey and other development partners and fully aligned with the country-specific needs, UNDP aims to tackle the impacts of the pandemic under three priority areas: Health system support; Inclusive and integrated crisis management and response; Social and economic impact needs assessment and response.I am pleased to present these 25 region-based sectoral analysis reports that provide policy recommendations and action plans for key economic sectors in Turkey that are most impacted by COVID-19 pandemic. These reports, which were developed within the COVID-19 Resilience and Response Project in cooperation with Ministry of Industry and Technology and Development Agencies, formulated in the light of recent global context and trends as well as UNDP’s response to COVID-19 crisis. Through this work, our aim is to support national capacities for an integrated and inclusive crisis management, ensure business continuity and prevent supply chain disruptions and speed up the development of the key economic sectors -automotive, textile, food, machinery, and logistics in different regions of Turkey and to increase competitiveness on a regional basis.Our recovery efforts focus on rebuilding more inclusive economies and societies, moving towards a low-carbon and climate-resilient world where no one is left behind. We believe that these reports will provide a pathway for economic recovery of sectors and development of regional competitiveness. In the reports the review of the pandemic crisis impact is accompanied by a set of policy recommendations targeting both the interventions in response to the negative effects of the pandemic and the post-COVID-19 social and economic recovery support measures. Overcoming the challenges faced by the sectors and society and ensuring better recovery can only be possible with joint efforts of the entire private sector, authorities, and the society as a whole. In this regard, we appreciate the cooperation of Ministry of Industry and Technology, Development Agencies, and all experts for the preparation of these reports. We believe that these reports will also enable better cooperation in key economic sectors and help to accelerate the implementation of the Sustainable Development Goals in Turkey.

Louisa Vinton

UNDP Turkey Resident Representative

FOREWORD

AUTOMOTIVE INDUSTRY ANALYSIS REPORT AND GUIDETR33 REGION (Afyonkarahisar, Kütahya, Manisa, Uşak)

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EXECUTIVE SUMMARYAutomotive industry is one of 5 fragile industries defined within the scope of the "Response to the COVID-19 Crisis and Resilience Project" financed by the Japanese Government and implemented in cooperation with the United Nations Development Program (UNDP) and the Turkish Ministry of Industry and Technology. With this report prepared specifically for the TR33 Region, the general assessment of the automotive industry in the COVID-19 outbreak process is made, and policy recommendations and action plans are shared in order to accelerate the development of the industry in the light of global trends and to increase the level of regional competition.

The automotive industry is a key industry that plays an important role in the development of countries with its capital-intensive structure and the volume of employment it creates. Although there are countries such as China, USA, Russia, South Korea, Japan, India, Germany, Italy, Spain, France as the major automotive industry countries on a global scale, the Eastern European countries (such as Bulgaria, Czech Republic, Poland), Turkey and several Middle East countries stand out as the rising values of the industry. With the export-oriented structure of the Turkish automotive industry, production infrastructure with high quality standards, the availability of qualified personnel and the advantages of feeding both European and Middle East/African markets in terms of logistics, national and international companies in different segments (passenger cars, light/heavy commercial vehicles and heavy vehicle) enables the production of vehicles [Ministry of Development, 2018]. Turkish automotive industry, which includes 13 main industry companies and more than 1,500 sub-industry companies, is predominantly located in Marmara Region (Kocaeli, Sakarya and Bursa).The automotive industry, which has an important share in the socio-economic development of the TR33 Region, has developed under the leadership of Manisa province and with the support of Kütahya province, with foreign capital or partner industry companies (Standart Profil, Tırsan Kardan, Maxion Jantaş, İnci GS Yuasa Akü, Componenta Dökümcülük etc.) stands out as the supporting region of the Turkish automotive industry.

In the study of analysis which was conducted specifically for the automotive industry in TR33 Region, the results of the survey study and focus group meeting and statistical and categorical data obtained from secondary sources were used. In this context, strategy and policy recommendations for the industry are designed and shared with decision-makers.

It was observed that the strong negative impact of the COVID-19 pandemic, which spread in March 2020, on the global automotive supply chain was felt similarly for companies in the region and caused the following effects:

• Sub-industry companies across the region have completed the year 2020, approximately 11% below their export levels due to the failure to meet the demand because of partial production stops, decreases in demand in export markets and/or raw material supply difficulties.

• The most basic problem observed throughout the industry was experienced in human resources management mechanisms (supplying spare personnel instead of key personnel who moved away from the system due to quarantine and/or disease related reasons, personnel transportation processes, actions to reduce the effect of contamination in production systems, etc.). However, due to the legal regulation to prevent the termination of the work contracts of the workers in the Labor Law No. 4857 and the provision of reserve personnel instead of the key personnel who move away from the system due to quarantine and/or disease the total number of employees has increased by %10-15 compared to the production conditions before the pandemic.

• The vast majority of companies across the industry can address the liquidity problems that arise due to increased operational costs (logistics, human resources, etc.) and turnover losses (short-time working allowance, breathing loans, loan/tax debt restructuring, etc.) were observed to be solved with the financial support packages provided by the state.

• While companies in the global automotive industry are dealing with reducing the destructive effects of COVID-19 pandemic and putting it back into full capacity, in parallel, companies will emerge to meet the demands of new generation users and in line with some trends

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anticipated for the near future of the industry, it is observed that they intensively work for transformation activities in both technological and organizational areas. It was observed that there are new global trends such as the electric vehicle transformation that emerged in order to support the reforms planned by developed countries, especially in the USA and the European Union, in areas such as environment and climate; development of autonomous driving and connected vehicle technologies in the fields of human safety, also supported by data science; the development of advanced material technologies in order to reduce the environmental impacts of the new generation vehicles that will emerge (fuel savings and indirectly less carbon emission due to lightened vehicles) and to meet safety expectations. At the same time, it is observed that the industry has a tendency to simultaneously improve constraints such as environmental impact, cost and time by supporting production systems with more modern, integrated robotic technologies (Industry 4.0 applications).

The action plans and policy recommendations shared which were addressed in TR33 Region in order to transform the expected transformation areas into policy recommendations in light of global trends were summarized as follows under 5 main strategy titles (Skills and Capacity Development; R&D; Infrastructure; Legal Regulations and Financial Regulations):

• Making an optimal network structure and resource planning by analyzing the new infrastructure requirements (electricity generation capacities, charging station distribution, locations, parking spaces, etc.) that will be needed for new generation vehicles (electric, hybrid) and resource planning by analyzing new infrastructure requirements (electricity generation capacities, charging station distribution, locations, parking spaces, etc.).

• Conducting local supplier assessment and development programs in order to accelerate the process of involving domestic suppliers of the TOGG vehicle and to manage them in a healthy way.

• Supporting the transformation of digital transformation and design-oriented production systems with financial support programs and mentoring activities in order to adapt the manufacturing companies in the region to the change process as a result of the maturation of the electric vehicle market and the termination of diesel vehicle production in the near future within the scope of compliance with EU regulations

• Using some of the existing production infrastructures by exporting to conventional vehicle markets in countries such as Africa and the Middle East, which are predicted to be unable to complete the transformation of electric vehicles simultaneously with developed countries in the near future

• Developing battery technologies, embedded software and sensors, which will play a critical role in the industrial transformation with R&D studies to be carried out in coordination with the automotive supply industry cluster and innovation center operating in Manisa, in cooperation with non-automotive sectors, bringing high value-added product groups to the region.

• Making the region a center of attraction by creating project-based privatizations in investment incentive programs and bringing global manufacturers operating in the production of high value-added product groups to the regional ecosystem with ZAFER Investment Support Office promotional activities

• Design and implementation of integrated areas (campuses) with advanced technological and logistics infrastructure services that will include the automotive industry and supporting industries (electronics, informatics, etc.), manufacturing companies, educational institutions, service providers, entrepreneurs and R&D centers serving the industry (One of the options can be thought as transforming MOS Logistics Center into a suggested integrated structure)

• Achieving cost and time savings by integrating Çandarlı Port, İzmir Port or Gemlik Ports, where the manufacturing companies in the region will provide logistics costs, into advanced combined transportation activities.

• Developing and implementing professional development systems and programs for application-oriented and new generation vehicles, taking into account new technological requirements in line with the needs of the industry


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• Developing and spreading the green OIZ concept in order to meet the EU environment, climate legislative changes and consumer expectations and spreading industrial symbiosis practices in order to meet the EU environment, climate legislative changes and consumer expectations (low energy use, carbon emission, etc.) under the leadership of Manisa OIZ management

• Designing cloud platforms for institutional capacity development and staff competence development and promoting online applied training programs for industry development

• Identifying and making an inventory of products that can be produced throughout the region, add value to the industry and import substitutes, and develop the patenting and branding processes of these products

Based on the results of the survey study and focus group meeting of the medium and large scale sub-industry companies operating under the automotive industry throughout the region, it has been observed that the current transformation strategies of the majority of them are similar to or overlap with the United Nations' Sustainable Development Goals. The industry stands out as one of the leading industries in Turkey, especially with its practices in the fields of environment, climate and energy management. It has a structure that can establish adaptive and flexible structures and prevent cost increases based on the high-impact risks such as the COVID-19 pandemic, thanks to the efficiency and crisis management mechanisms it has put forward in each part of the value chain. In addition, it has been observed that it is under the average of Turkey particularly in the number of female white-collar workers in terms of gender equality in the industry.

This report is expected to guide the transformation process of the automotive industry based on the global trends in TR33 Region, and to contribute positively to the decision-making processes to be applied to increase the global competition level of the automotive industry in the region.


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1. INTRODUCTION The closure and/or restriction measures taken in our country to slow the spread of the COVID-19 pandemic started to negatively affect industrial production and foreign trade activities as of mid-March 2020, and it is observed that the negative effects on economic parameters have worsened by April 2020. In this context, "COVID-19 Crisis Response and Resilience Project", funded by the Japanese Government and the United Nations Development Program (UNDP) in cooperation with the Turkish Ministry of Industry and Technology and the Ministry of Development Agencies, which is key for Turkey's economy and seen to be affected in a fairly high level of pandemic impact 5 fragile industry private in (Automotive, Textile, Machinery, Logistics and Food), has been carried out.

Within the scope of the "Fragile Industry Analysis and Guidelines" study, which is one of the important pillars of the "COVID-19 Crisis Response and Resilience Project", it has been possible to;

• Examine the effects of the COVID-19 pandemic on companies in the relevant industries (especially SMEs) and conduct current situation analyzes in order to contribute to the development of more inclusive and sustainable business models of SMEs in the post-epidemic process;

• Share the short, medium and long term strategy and policy suggestions on industrial/regional basis in line with global trends.

In TR33 Region, the automotive sector stands out with a developed sub-industry network (for example, Maxion İnci, Maxion Jantaş, CMS, Standart Profil, Tırsan Kardan, Endosa etc.), in which foreign capital or partner companies play an important role. Due to the long-term positioning of the automotive industry in the regional ecosystem from the past, a structure that is largely integrated with supplier companies and related industries (plastic, metal (rim), electronics (cable systems), etc.) is displayed. It is an important region for new generation power units (engine, battery, gearbox, differential box, etc.) to be used for conventional vehicles or for components belonging to new generation vehicles (fuel cell, electronic parts, software, etc.) that will emerge as a result of global trends in terms of investment opportunities. Having strong, innovative and domestic production opportunities in the supply of products or product groups (especially textile, electronics, machinery and sheet metal molding industries) belonging to main and large-scale sub-industry companies is an important advantage for the region.

Within the scope of the regional assessment report prepared for TR33 Region (Afyonkarahisar, Kütahya, Manisa and Uşak provinces) with the researches conducted in the automotive industry;

• The regional focus group meeting, in which high-level officials from key institutions and organizations of the industry and representatives with technical knowledge participated in the survey study conducted and in parallel, and a wide perspective on many issues specific to the industry, was included in the process by being participated by different stakeholders, especially regional and national clear trends;

• Sharing detailed current situation analysis by examining the SMEs operating under the automotive industry in the region under the following NACE (v2) codes (Statistical Classification of Economic Activities);

• 29.1X: Manufacture of Motor Land Vehicles and Engines (Automobile, Light Commercial, Heavy Vehicle etc.)

• 29.2X: Manufacturing Bodywork (bodywork); Trailer (trailer) or Semi Trailer (semi-trailer) for Motor Land Vehicles

• 29.3X: Manufacturing of Parts and Accessories for Motor Vehicles (Brake, Exhaust, Electrical Parts, Seat etc.)

• Determining the direction of developments regarding the products and services of the future in the process of providing flexibility and proactive management regarding risks specific to the automotive industry;

• Determining what the customers' expectations and changing consumption habits might be and what might be the value suggestions that can be put forward by using the existing capabilities and strengths in the industry;

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• By shaping the future strategies of the industry in line with global trends, it was ensured to prepare road maps in order to strengthen the competitiveness level of the automotive industry and to establish sustainable and environmentally friendly systems throughout the industry.


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2. METHODOLOGYThe work flow chart used in the studies carried out within the scope of the project is shared in Figure 1.

Focus Group

Meeting

Surveys and Reports of Umbrella

Organization

Supporting Data

(TURKSTAT; GIB, TIM etc.)

Supplying of the Data Sets Belonging to the

Automotive Industry of TR42 Region

Cleaning and Transformation

of Data

Conducting Sector based

Statistical Analyses

Current Status Analysis for

COVID-19

Sectoral Gap Analysis

Preparing the Strategy and

Policy Recom-mendations

Evaluation and Reporting

Sectoral Trends After COVID-19

Preparing the Data Sheet of TR42

Region

Figure 1. Work Flow Chart

The preparation process of the content of the regional automotive industry assessment report prepared within the scope of the project was carried out under three main activities. These are respectively as follows;

A. Data CollectionAll meetings held in data collection processes were held online due to pandemic conditions, and the opinions and suggestions of selected large-scale companies, which are the current/potential customers of many SMEs, who experience the whole of the components in the value chain specifically for SMEs, which are the focus of the study has been taken. Both primary and secondary research methods were used in the data collection process.

1. Primary Research Methods

i) Survey Study: With the survey study, up-to-date data were obtained for the industry that could not be collected from secondary sources. It was ensured that the online survey study prepared for the "Fragile Industry Analysis" was announced to the relevant industry stakeholders by different institutions and organizations, especially the Development Agencies. Since the announcements were made through many channels in order to increase the participation of SMEs in the relevant industries to the survey, the sample selection of the companies to fill out the survey was not possible during the implementation phase of the survey. However, after the survey was conducted, in order to minimize the possible deviations, the answers obtained from the questions were filtered according to a sample and the details are shared in Section 6.1.1.

ii) Working Group Meetings: One of the most important sources of information for the report to be prepared was evaluated as the industrial working group established by the Ministry of Industry and Technology. 4 reports to be prepared for the automotive sector (from Level 2 Regions of Statistical Region Units Classification: 7 experts from 4 Development Agencies (BEBKA, MARKA, AHILER and ZAFER) operating in the relevant regions for 4 reports to be prepared for the automotive industry (TR42; TR42; TR33 and TR71 Regions) were added to the working group, their studies were examined by the industry expert and they were supported in the interpretation

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and evaluation processes for the validity of the analyzes, inferences and policy/strategy proposals. During the 14-week working period following the preparation of the inception report, the working group meetings were held every two weeks, six times in total, and the main agenda items were planned as follows:

• Summarizing the activities carried out in the last two weeks and exchanging ideas• Timing of focus group meetings and definition of participant profile by taking regional

dynamics into consideration• Making general evaluations of focus group meetings and making general inferences that

can be added to the industry report• Collecting regional inputs by sharing the developments in the draft form of the report every

two weeks.• Gathering general evaluations and suggestions about the process

iii) Focus Group Meeting: One of the important qualitative information sources of the primary research was considered as focus group meetings. The related focus group meeting was used to obtain a rich perspective on many issues and a wide perspective by making sure that the industry's key institutions and organizations (Chambers of Commerce and Industry, Organized Industrial Zones, Industrial roof Organizations, Industry Organizations, Research Institutions, etc.) and the Senior officials in the private industry have participated in the meeting (detailed participant lists are given in Annex-1).

The stakeholders of the industry were made participate in the process at the stages of determining the direction of the developments regarding the products and services of the future in the process of providing flexibility and proactive management for risks specific to the automotive industry and what customers' expectations and changing consumption habits might be and what might be the value suggestions that can be put forward by using the existing capabilities and strengths in the industry, and then regional approaches, opinions and suggestions were collected on the following issues. The topics discussed in the meetings are given below under three main headings:

1.Stage: Evaluation of the effects of the COVID-19 outbreak on the industry and additional measures taken due to the pandemic

• Product Supply Problems as a Result of Supply Chain Breaks • Additional Measures Taken Due to the COVID-19 Outbreak

• Continuity of Production• Synchronization of Suppliers• Employee Safety and Facility Requirements

• Sales/Marketing Operations• Problems in Financial Processes (export, investment credits)• Support Programs of Public Institutions and Local Administrations

2.Stage: Evaluating the developments regarding the products/services of the future and positioning the region against these developments

• China-based procurement centers of Eastern Europe and/or the possibility of shifting to Turkey

• Possible effects of electric vehicle market share increase in the near future (TOGG expectations)

• oThe effects of the localization efforts of imported products on the sub-industry market in the region (Joint R&D Studies)

3.Stage: Discussion of the strategies to be implemented in order to increase the competitive level of the region.

• Ensuring flexibility in supply chain management processes and risk management• Human resource status• Technology adaptation and development


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• Clustering in automotive supply industry• Foreign trade and market share developments

The findings obtained from the focus group meeting held in the TR33 Region are shared in detail in Section 6.1.2.

2. Secondary Research Data

i) Institutional Data Sources: Some of the data sets to be used in the content of the study were compiled from the databases of alternative institutions such as WorldBank, OECD, UNDP, UNCTAD, WTO, WEF, TURKSTAT, TOBB, TCMB, TR Ministry of Commerce, OSD, ODD.

ii) Reports Prepared by the Ministry of Industry and Technology and Development Agencies: Many reports prepared by the Ministry of Industry and Technology and Zafer Development Agency on the development of the automotive sector and examining the effects of COVID-19 have been examined and used as a reference document.

iii) Other Researches, Publications, Reports: Reports and studies prepared periodically by professional organizations and umbrella organizations (for example TAYSAD, OSD, ODD, OSS etc.) for the automotive industry were examined and used. Likewise, Boston Group Consultancy (BCG); KPMG; Industrial reports prepared by international consultancy firms such as Deloitte were also used.

B. Data Analysis and InterpretationIn the reports, the current situation analysis of the automotive industry operating in the TR33 Region was carried out using the following analysis methods based on the "Toolkit and Application Guide for Spatial Value Chain Analysis" [KAGM, 2020] prepared by the General Directorate of Development Agencies:

• Simplified Value Chain Analysis • SWOT Analysis• PESTLE Analysis• Michael Porter's Five Forces Analysis• Gap Analysis

Using the primary and secondary data sources included in the data collection section, short, medium and long term strategy/action and policy recommendations were prepared in order to reduce and manage the risks and threats arising in the current situation analysis and to support and develop opportunities and positive practices. While some of the proposals prepared are macro-level issues that fall under the jurisdiction/responsibility of different institutions and organizations, some of them are aimed at the regional level and contribute to the work of the Development Agency and other regional institutions.

In addition, the horizontal issues (resource efficiency, climate change, gender equality and crisis management) that cut the automotive industry were examined in detail and shared in the report in the light of the Sustainable Development Goals declared by the UN in 2015 and aimed to be achieved by 2030 on a global scale.

C. Evaluation and ReportingThe automotive industry analysis, which was prepared by taking into account the regional dynamics, after examining the effects of the COVID-19 pandemic on the industry (crisis management) and other horizontal issues, was shared with the project stakeholders and concluded with reporting processes.

6

3. Automotive Industry Profile3.1. General Outlook of the Automotive Industry in the WorldThe automotive industry is a key industry that plays an important role in the development of countries with its capital-intensive structure and the volume of employment it creates. The industry, whose total size in the global economy was approximately 4.5 trillion USD in 2019, accounts for approximately 5% of the world economy [Statista, 2020], creating employment for approximately 80 million people (for example, the EU-27 Region total it accounts for 6.1% of its employment [EC, 2020]). According to the report prepared by the OECD for the automotive industry [Lejarraga et al., 2016], the production amounts in the first 20 countries correspond to 90% of the total production in the world and the industry is regionalized automotive hubs in different continents according to production volumes. As shown in Figure 2, it is observed that the developed EU countries are at the center of the world market and have become the balancing point of the world trade network. Given the industry's major export countries (eg, Germany, France, USA, etc.), is is seen that many of the potential export capacity operate in the 75-80% level, and the ratio decreases to 35-40% level in Eastern European countries such as Turkey, Poland, Czech Republic [Trademap, 2021].

Germany72.5%

USA74.2%

CAN78.3%

MEX

China44,5%

RUS

JPN

POLNLD

GBR79,3%

ESP

BEL FRA71,2%

AUT

ITA

TUR

ARESAU

CZE

Figure 2. Regional Distribution based on Global Automotive Industry Export Capacities [Trademap, 2021]

According to the data of the end of November 2020, the world total vehicle sales volume with 62.6 million vehicles shows a decrease of 14% compared to the same period of 2019 (January-November) [OICA, 2020a].

02015 2016

MILL

ION

PIECE

S

2017 2018 2019

20

40

60

80

100

Europe (EU-28) America Asia / Middle East Africa

19.04

25,69 25.55

20.13 20.76 20.81 20.87

25.45 25.29 25.31

1.551.31 1.14 1,23

1.18

43.41 46.86 48.55 47.65 44.00

Figure 3. World Vehicle Sales Volumes [OICA, 2020a]


7

In addition, according to the data of the end of the third quarter of 2020, more than half of the global production (56.3% - approximately 29.3 million units) was realized in the Asia-Oceania Region. This region is followed by the European Union (EU-27) with 17.6% and NAFTA Regions with 18.1%. While developed countries such as Germany, Italy, Spain and France stand out from the European market, the major markets such as China, USA, Russia, South Korea, Japan and India stand out in the world [OICA, 2020b].

2019 2020 2019 2020 2019 2020 2019 2020 2019 2020

Europe 32,8 22,9 28,4 19,7 3,9 2,8 0,4 0,3 0,1 0,1

Asia 71,2 55,5 58,3 44,3 7,7 6,1 4,9 4,9 0,4 0,2

America 31,1 21,6 10,9 7,0 19,0 13,9 1,1 0,7 0,0 0,0

Africa 1,6 1,0 1,2 0,7 0,4 0,3 0,0 0,0 0,0 0,0

0,0

20,0

60,0

40,0

80,0

120,0

100,0

140,0

Total Total Passenger Car

Passenger Car

Light Commercial

Vehide

Light Commercial

Vehide

Truck Truck Bus Bus

MILL

ION

PIECE

S

Figure 4. World Vehicle Sales Volumes [OICA, 2020a]

However, by the beginning of 2021, the global automotive industry is under pressure due to weakening economic balances, commercial quota implementations, legal restrictions, logistical difficulties in supply/delivery processes and second wave concerns of the COVID-19 outbreak. The COVID-19 outbreak continues to pose a threat to the automotive industry, given the falling capacity utilization rates and increasing fixed costs, with the contraction in both demand and production. Due to this impact, there was a 25% contraction in global automotive production in 2020 and a loss of approximately 5.7 billion US dollars in global trade (2.5 billion US dollars for the EU-27 region only) [ATB, 2020]. While there are pioneering signs that automobile demand is starting to recover in China, it is observed that production and sales are returning to target production levels in the second half of 2020. Assuming a similar but delayed recovery process in Europe and the USA, it is observed that the improvement in sales and production volumes is unlikely to occur before the second quarter of 2021.

The amount of investment made by automobile main and sub-industry manufacturers in the European Union (EU-27 Region) in R&D activities increased by 6.1%, reaching an all-time high level of € 60.9 billion for 2020 [ACEA, 2020].

Company mergers and large-scale acquisitions have started to be seen between the main and sub-industry companies of the industry, especially in order to create an economy of scale and to manage the high costs arising in the digital transformation process of the industry and to meet high customer expectations. For example;

• Merger of Italian Fiat Chrysler Automobiles and French Peugeot-Citroen brands in 2020• Incorporation of Sweden-based Volvo company into Geely brand of Chinese origin in 2020• Developments such as the German-origin BMW Group and Daimler companies signing a

partnership agreement for new generation vehicles in 2018 can be considered among the important collaborations in the global automotive industry.

8

As a result, the global automotive industry experienced the impact of the COVID-19 pandemic significantly in 2020, and thanks to the adaptive and flexible supply chain models it developed as a result of its past experiences, it has managed to overcome the effects of the crisis in the shortest time possible with minimum damage. However, it continues to make necessary financial and operational investments for the preliminary preparations against the 2nd and 3rd waves of the pandemic conditions and to bring the capacity utilization rates to the levels of the end of 2019 quickly.

3.2 Overview of the Automotive Industry in TurkeyWith strong links to the owner that the property and export-oriented production strategy, Turkey's automotive industry has taken a position as one of the leading industries in Turkey's economy with a large number of low, medium and industries based on high technology (iron and steel, textiles, plastics, chemicals, rubber, electronics, informatics, etc.). Due to the international nature of the automotive industry, global dynamics have an increasing importance in the development of the automotive industry. The automotive industry, which has undergone a very serious structural change in the last 20 years, has become a industry that gives foreign trade surplus with its high volume export activities to developed countries. It has also expanded its sustainable production competitiveness in the field of R&D and reached the ability to design and commission vehicles from scratch. In addition, Turkey has an important role in terms of export-oriented structure of its automotive industry and its location which allows it to supply both Europe and the Middle East/Africa and the fact that national and international companies produce vehicles in different segments. Almost 80% of its production is exported [Ministry of Development, 2018]and the competitive international relations, regional problems, rapidly accelerating technological transformation and rapidly changing consumer expectations play an important role in shaping the sustainable future of the industry, which is at such a key position. In order for the automotive industry to maintain and develop its current competitive position, to further develop production and exports, it is necessary to closely monitor and evaluate trends affecting the global automotive industry, and to implement changing policies and strategies with agile business management mechanisms.

Despite the decrease in the domestic market demand of the automotive industry, the domestic market demand started to increase again as the society turned to individual vehicles in 2020 due to the COVID-19 pandemic and as a result of the banks' car loans to advantageous levels in the first half of the year.

According to the weights in the consumer price index published by TURKSTAT for 2020, 5.9% of all expenditures made by households are related to automobile expenses (for example, the purchase of transportation vehicles (first and second hand), spare parts and accessories, fuel and lubricants, maintenance and repairs) [TURKSTAT, 2020a].

Passenger cars, buses, trucks, pickup trucks, vans and tractors are produced by 13 major industrial companies in Turkey. Automobile and light commercial vehicle total market increased by 61.3% in 2020 compared to the end of 2019 and reached 772,788 units (610.109 passenger cars + 162.679 light commercial vehicles) [ODD, 2020]. As shown in Figure 5, total vehicle production by the end of 2020 was approximately 1.3 million units, approximately 11.2% below the end of 2019 data.


9

2016 2017 2018 2019 2020

Midibus 3330 3732 3316 2526 2043

Minibus 44415 55036 56934 61629 51464

Bus 8083 8166 8541 9199 7896

Van 461837 462389 429361 386245 358182

Truck 17374 23502 25537 19003 23226

Car 950888 1142906 1026571 982642 855043

0

0,2

0,6

0,4

1

0,8

1,4

1,2

1,6

1,8Mİ

LYON

ADE

T

Figure 5. Turkey Vehicle Production Numbers [OSD, 2020]

The automotive sub-industry, which has more than 1,500 companies, is densely located in Marmara Region (Bursa, Kocaeli and Sakarya). It appears that these companies mainly have experience and expertise on mechanical parts (engine, injection), accumulator, plastic/rubber parts (inner-outer tire), in-vehicle safety system (airbag, seat belt), seat, fabric, safety glass, sheet metal processing and mold.

In the automotive industry, where the total export volume in 2020 is USD 22.6 billion, 42.1% of this figure is made of passenger cars, 6.2% of buses, midibuses and minibuses and 30.4% of sub-industry products (For example, 3.3% injector group; 0.9% aluminum wheels; 0.8% piston group; 0.6% lighting/signage devices, etc.). Although the share of the European Region in exports is quite high, especially Germany (13.4%), France (12.6%), England (9.3%), Italy (8.8%), Spain (5.9%) ) realizes more than 50% of the total exports. Among the top 15 exported countries, there are only Israel (2.8%); Egypt (1.9%); Morocco (1.85%) and Russia (1.8%) from outside Europe [UİB, 2020].

According to the 2020 year-end report of OSD, the total number of employees working in companies operating in the automotive main industry is over 50.000 by the end of 2019, likewise, according to the General Directorate of Industry and Productivity, it is stated that more than 190.000 personnel are employed as of the end of 2017. When the employees in activities such as sales, marketing, maintenance and repair at the end of the industry's value chain are taken into account, an employment number of approximately 400.000-450.000 people is anticipated in the industry [STB, 2020b].

When the national capacity utilization rates of the automotive industry are examined, the industry, which had an average value of approximately 80% in 2019, decreased to 43% in April 2020 and then completed the year at 76% with a rapid recovery trend as of the end of the year [CBRT, 2020]. It is observed that the competitive level of the industry is highly affected due to the low production efficiency rates and high input costs brought about by the related low capacity ratios.

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3.3 Overview of the Automotive Industry in TR33 RegionTR33 Region has an important leverage effect on state with number of employees employed, diversity and capacity of the manufacturing industry, with the calculated tax base and foreign trade volume of Turkey's socio-economic development.

The comparisons of the number of institutions operating in different NACE codes belonging to the automotive industry and the total number of employees obtained from the TOBB industry database [TOBB, 2021] belonging to the provinces in TR33 Region are shared in Table 1. It is seen that the automotive sector throughout the region has developed under the leadership of Manisa province, but Kütahya has a very important potential and comes to the fore.

Tablo 1. Companies and Employment Numbers According to TR33 Region Sub-NACE Codes based on Provinces

NACE Codes 29.1 29.2 29.3

AfyonkarahisarNumber of Registered Producer Companies [unit] 0 10 1

Total Employment [person] 0 111 9

KütahyaNumber of Registered Producer Companies [unit] 0 7 5

Total Employment [person] 0 146 3.272

ManisaNumber of Registered Producer Companies [unit] 1 3 41

Total Employment [person] 45 37 5.202

UşakNumber of Registered Producer Companies [unit] 0 1 0

Total Employment [person] 0 9 0

However, since since March 2020 when the COVID-19 outbreak has begun, it is observed that there are fairly serious decline in terms of both foreign trade figures related to the automotive industry firms operating throughout the region as well as in Turkey. It is observed that the exports of the automotive industry across the region and the 1st tier sub-industry companies operating in Eastern Marmara Region have also been affected significantly affected due to the short term break in the production of the companies located inside and outside the region. In industries such as iron and steel, non-ferrous metals, electricity, textile, machinery, which are the main suppliers of the automotive industry, slowdowns have occurred in transportation activities. Although the impact of the pandemic is tried to be reduced with the measures taken, it is observed that the export and sales figures remained well below the last quarter figures compared to 2019.

29,1 29,2 29,3 29,1 29,2 29,3

0,10,00,00,0 0,00,2

0,00,00,0 0,00,2

0,00,00,1

1,2

1,82,0

1,9

0,00,2

0,00,00,0 0,10

0,5

1,5

1

2

2,5

Billio

n TL

İhracat İthalat

2018 20192017 2020

Figure 6. TR33 Bölgesi Dış Ticaret Hacimleri [TÜİK, 2020c]


11

In Figure 7, foreign trade information obtained from TURKSTAT (import and export volumes for different NACE codes) is shared and it is observed that the total amount of exports decreased by approximately 10.8% compared to 2019, but there was an approximately 68% increase in import activities throughout the region. It is observed that this situation continues to production activities without interrupting the supply of raw materials and intermediate products in the industry, and the shrinkage in the international market is balanced by the dynamics of the domestic market as a result of the public's orientation to the use of individual vehicles in the domestic market and the provision of advantageous vehicle loans. For example, the number of registered passenger cars in TR33 Region in December 2020 (489,206) shows an increase of approximately 3.1% compared to the data of December 2019 (474,423) based on TURKSTAT data [TURKSTAT, 2020b].

In addition, the foreign trade volumes have some relative shortcomings compared to the real life data since the foreign trade values of the enterprises (especially the sub-industry companies) that produce in the provinces of the Region but are registered in other large provinces such as Istanbul and İzmir in the relevant TURKSTAT data. Although commercial activities are carried out with a very rich product group, product groups such as accumulators, rims, bearings, steering wheels, brakes and cable connection sets, where large-scale sub-industry companies in the region also operate, are used in commercial activities in foreign trade especially as sub-industry.

According to the data of the Turkish Employment Agency, it is observed that the annual number of job placements in all sectors specific to the region decreased by 24.4% compared to 2019, and unemployment fund applications decreased by approximately 32.8% [ISKUR, 2020]. In addition, according to the Social Security Institution data, the total number of actively insured people increased by 7.4% as of October 2020 and the total number of workplaces increased by 4.2% as of October 2020 in TR33 Region [SGK, 2021]. These change figures obtained for the region in general are assumed to be parallel to the automotive sector, which has an important place in the industrial composition of the region. One of the most important reasons behind the indicators such as the increase in the employed staff and the decrease in the unemployment fund applications is thought to be the additional employment numbers created in order to ensure the continuity of production under pandemic conditions, and the continuation of the dismissal ban signed by the Ministry of Family, Labor and Social Services.

The summary information of companies that have received investment incentive certificates under the motor vehicles industry specific to the TR33 Region is shared in Table 2 [STB, 2020c]. In the region, it is observed that there was an increase in foreign capital company investments in Kütahya, especially during the COVID-19 process (in 2020), although the amount of fixed investment in Manisa decreased significantly. There has been an increase in the number of facilities with incentive certificates throughout the region. Likewise, it is observed that there has been a decrease in the province of Manisa compared to the previous years in terms of the number of employment created, but an increase in Kütahya.

Tablo 2. Summary Table of Investment Incentive Documents Given in the Field of Motor Vehicles in TR33 Region

2019 2020TotalForeign

CapitalLocal

CapitalForeign Capital

Local Capital

Manisa

Number of Documents (Pcs.) 1 1 1 4 7

Fixed Investment (Million TL) 104,04 10,07 1,00 16,87 131,98

Employment (Person) 25 10 3 28 66

Kütahya

Number of Documents (Pcs.) 1 1 1 3 6

Fixed Investment (Million TL) 1,05 43,05 124,18 19,44 187,72

Employment (Person) 3 50 73 27 153

Afyonkarahisar

Number of Documents (Pcs.) 1 1

Fixed Investment (Million TL) 2,97 2,97

Employment (Person) 10 10

12

According to the relevant investment incentive certificates statistics, four (28.6%) of the incentive certificates issued in 2019-2020 throughout the region were issued to companies with foreign capital. It is observed that the remaining documents are predominantly prepared for facility modernization and expansion investments, and among these, the highest investment made at one time was made for the purpose of product diversification and expansion of the main industrial company in Kütahya in the year 2020. 2 out of 14 (14.3%) investment incentive certificates issued in 2019 and 2020 throughout the region are for motor vehicles bodywork manufacturing, trailer and semi-trailer manufacturing and the remaining 12 (85.7%) for the manufacturing of motor vehicles and parts and accessories related to engines.


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4. Effects of COVID-19 Outbreak on the Automotive IndustryThe negative impact of COVID-19 pandemic had in the global automotive supply chain companies in Turkey are also felt similarly. In particular, the main raw materials automotive industry/semi-finished products supplier with operations in Turkey as a result of breakage of starting the supply chain from China, main and side industries to close the production line between the months of March-June period of 2020 and/or have had their production capacity having to download to a minimum. Some preventive actions were activated again for the automotive industry which is one of the important industries of the industry and exports to Turkey. In many studies and reports prepared on the subject, the destructive effects of the pandemic were listed and its effects on the industry were shared. As a result of the synthesis of these studies examined within the scope of secondary data analysis with the results of the focus group meeting , the short-term positive and negative effects of the pandemic conditions on the main industrial companies and large/medium-sized sub-industry companies in the region are presented in Table 3.

Table 3. Short-Term (0-1 Year) Effects of the COVID-19 Outbreak on the Automotive Industry1

Part of the Value Chain Positive Effects After COVID-19 Negative Effects After COVID-19

Supply Processes/Logistics Activities

• Potential for the procurement centers to move from the Far East countries to Turkey and Eastern European countries which offer relatively low input costs (Quality standards and industrial knowledge of the local suppliers in the Automotive Sub-Industry in the TR33 Region, and integration of OEMs and major sub-industry companies into supply chains)• Re-evaluating supplier selection criteria and emphasizing the financial and operational stabilization of especially 2nd and 3rd tier suppliers (Tier 2 & Tier 3)

• Slowdown in customs processes due to reasons such as diluted overtime practices due to pandemic conditions, lack of personnel due to illness, indirectly, significant problems in raw material/intermediate product procurement processes of companies

Production Activities

• In the industry, where the worker safety and health measures are at a high level, the mandatory use of new precaution packages (additional personal protective equipment such as visors, surgical masks, etc.) against pandemic conditions, revision of existing instructions and procedures taking into account pandemic conditions, sterilization activities, periodic fever measurements, COVID tests, etc.) and complying with the guidelines of global institutions such as the World Health Organization (WHO).

• Decrease in production capacities due to diluted overtime practices due to pandemic conditions, disease-related personnel shortages, line closures.• Loss of productivity as a result of changes in worker/material layout plans and review of overtime plans in order to reduce the risk of contamination of the pandemic in production areas• Having production losses due to disruptions in raw material and intermediate goods inputs• Suspension and/or cancellation of investment plans and capacity increase programs

1- PwC (2020a); BCG (2020a); BCG (2020b); ILO (2020a); Deloitte (2020b); UN (2020); OECD (2020a); OECD (2020b); KPMG (2020); PwC (2020b); PwC (2020c); Deloitte (2020a); EY (2020); TAYSAD (2020)

14

Human Resources

• Making decisions for employees to use their annual leaves and/or to increase flexible/remote working practices• Establishing crisis management teams for different departments and performing vulnerability/stress tests for certain period intervals

• Reductions in the number of workers due to the financial shrinkage and decreasing profit margins due to the shrinkage in the market volume and/or giving employees compulsory unpaid leave• Cost increases and service supply problems, especially in personnel transportation services, as a result of the reduction of the number of people carried per vehicle• Suspending and/or canceling personnel training programs, personal development/manager development programs• Personnel's anxiety about being sick, sociological stress, working conditions by wearing a mask, etc. negative effects of factors on employee performance

Sales/Marketing Activities

• As of June 2020, there has been an intense increase in demand within the domestic market due to the increase in the individual vehicle preferences instead of public transportation in the travels of people due to the risk of transmission of the pandemic, and the significant reduction in vehicle loan interest rates by public banks. • Car pooling environments have decreased considerably and customers' individual vehicle preferences have increased. • The use of online and digital channels in sales/marketing activities

• Dealers postponing the resumption of work in order to prevent the intensity that will occur in the sales dealers in order to comply with the legal requirements of the central institutions/local administrations in force due to the pandemic, protecting the health and safety of the personnel, and continuing their activities by reducing their working hours today and this situation negatively affecting the vehicle sales. • Failure to meet the demand due to decreases in production capacity and low sales quotas for local distribution channels of companies with low profit margins compared to alternative world markets and/or low stock amounts• The global financial uncertainty after COVID-19 prevents people from making large-scale investments and this has a negative impact on vehicle sales.

Finance

• The majority of companies benefit from financial support packages (short-time working allowance, breathing loans, loan/tax debt configurations, etc.) provided by the government.

• Experiencing liquidity shortages and observing financial bottlenecks• Establishing capital measures to increase the cash ratio

After Sales Activities

• Significant reduction in maintenance and repair activities due to reduced vehicle mobility as a result of some decisions taken because of the pandemic (for example, curfews, remote work, postponement of travel-vacation plans, etc.)

The medium-term (1-3 years) effects on the industry in case the pandemic process and/or recovery period prolongs beyond anticipation are presented in Table 4.


15

Tablo 4. Medium-Term (1-3 Years) Effects of the COVID-19 Outbreak on the Automotive Industry1

Part of the Value Chain Positive Effects After COVID-19 Negative Effects After COVID-19

Supply Processes/Logistics Activities

• Commissioning risk management systems for supply centers and developing advanced forecasting models that can provide flexibility on supply chains • The procurement centers to move from the Far East countries to Turkey and Eastern European countries which offer relatively low input costs and integration of the local manufacturer companies to the supply chains

• Slowdown in customs processes due to reasons such as diluted overtime practices due to pandemic conditions, lack of personnel due to illness, indirectly, significant problems in raw material/intermediate product procurement processes of companies• Establishing significant cost pressures on suppliers and logistics processes due to the transformation of companies into cost-oriented systems in the emerging financial uncertainty environment.• Re-evaluating supplier selection criteria and emphasizing financial and operational stabilization of especially 2nd and 3rd tier suppliers• The main industry and large-scale 1st tier suppliers to request shock protocols with subcontractors to ensure that they continue production/shipment for emergency management when necessary

Production Activities

• Reducing human-dependent operation rates in production processes by investing in digital and automation technologies• Pro-active identification and elimination of production line problems using predictive and optimizing maintenance/production solutions• Reduction of maintenance, service and downtime costs and times with the automation systems used and advanced prediction models based on big data

•Decrease in production capacities due to diluted overtime practices due to pandemic conditions, disease-related personnel shortages, etc.•Suspension and cancellation of investment plans and capacity increase programs •Having production losses due to disruptions in raw material and intermediate goods inputs

Human Resources

• Establishment of in-house crisis management teams in order to be prepared for possible risk factors and to ensure the durability of supply chains• Establishing crisis management teams for different departments and performing stress tests periodically

• Reductions in the number of workers due to the financial contraction and decreasing profit margins due to the shrinkage in market volumes.• Reducing the number of personnel due to the reduction of human loyalty with new technology investments

Sales/Marketing Activities

• The use of online and digital channels in sales/marketing activities • The emergence of new generation and creative sales programs (the integration and implementation of Smart Segmentation and Smart Pricing Algorithms; the use of AR/VR technologies; the active use of online communication channels in sales activities, etc.)

• Car pooling environments have decreased considerably and customers' individual vehicle preferences have increased. • Reducing the number of dealers (indirectly in the number of employees) as a result of the active use of new technologies

Finance

• Application of regular liquidity stress tests• Ensuring pro-active and dynamic solutions by integrating new generation financial solution algorithms into their systems

• Experiencing liquidity shortages and observing financial bottlenecks• Significant decrease in cash conversion rates and decline in capital investments

After Sales Activities

• Spare parts suppliers to produce solutions through digital and online platforms and increase in e-commerce activities

• Security problems caused by postponed maintenance/repair activities

1- PwC (2020a); BCG (2020a); BCG (2020b); ILO (2020a); Deloitte (2020b); UN (2020); OECD (2020a); OECD (2020b); KPMG (2020); PwC (2020b); PwC (2020c); Deloitte (2020a); EY (2020); TAYSAD (2020)

16

5. 5 Trends Specific to the Automotive Industry5.1. Special Trends in the Automotive Industry in the WorldWhile the global automotive industry is dealing with reducing the destructive effects of the COVID-19 pandemic and activating the industry at full capacity again, it is observed that a lot of time is spent on transformation activities in both technological and organizational areas that will emerge in parallel to meet the demands of new generation users and in line with some trends anticipated for the near future of the industry. It is possible to categorize the developments in the global automotive industry in five main groups:

• Activation of environmentally friendly new generation vehicles (reduction of carbon dioxide emission and fuel consumption)

• Development of automotive technologies (development of autonomous driving and connected vehicle technologies)

• Development of in-car information/entertainment and communication systems• Advanced material technology applications• Integration of advanced production technologies (smart factories, robotics, 3D applications

etc.)

One of the most important reasons behind these trends can be defined as environmental and security-oriented expectations changes in the supply side of the industry. As a result of the transformation of social demand towards the use of renewable energy sources, more sensitive to the environment, protecting natural resources, automotive manufacturers are forced to offer innovative, environmentally friendly and more reliable products to meet these expectations. In addition, additional applications made to create an intense competitive environment and to meet changing consumer expectations lead companies to take some cost-reducing actions. With the innovative products they will develop, they plan to stand out in the global competitive environment and become a leader, as well as to strengthen their brand values by meeting the expectations of the new generation consumers.

In Figure 8, key activities that may occur in the process of transformation into smart systems by completing the digital transformation of the automotive industry are shared by taking time intervals into consideration..


17

Environment Oriented Security OrientedAdministrative Purposes Operational Efficiency

2020 2030 2040 2050

Vehicles with Advanced Material Technology (Lightweight Composite Materials)

Conventional Vehicles (Gasoline Vehicles)

Conventional Vehicles (Diesel Vehicles)

Hybrid Vehicles

Plug-in Hybrid Vehicles

Fuel Cell Vehicles

Electric Vehicles

Autonomous and Connected Vehicles

Risk Management and Development of Flexibility Mechanisms

Next Generation Supply Chain Solutions (Big Data Management and Advanced Forecasting)

Completing Digital Transformation Integration of Next Generation Solutions

Smart Cities Activation Zero Carbon Systems Conversion

Product Localization Studies

Sectoral Clustering Studies

Sectoral Mergers (Software, Electronics, Automotive, etc.)

Automation, Robotics and Digital Transformation

New Generation Sales Techniques (Online Channels, etc.)

Figure 7. Timeline of Industrial Trends1

The direct impact of these trends on the automotive industry is that more software and electronic hardware will be used in production processes and digital transformation will be supported. In such transformation process, it is assumed that companies operating in the software and electronics industries will be added to the main industry and supplier network we are used to. It is predicted that this situation will bring along radical changes on the existing value chain (mergers, new sources of income, etc.). In addition to the existing main and sub-industry companies in the automotive industry, it is assumed that intermediate forms will enter the system and companies specialized in different fields such as software/electronics will be included in the value chain and the share of the companies operating in the software/electronics industries of the automotive industry in their turnover will increase.

In addition to technological transformations, there are short/medium-term radical transformations and applications awaiting the automotive industry, as shown in Table 5, whose importance has increased in the COVID-19 pandemic.

1- Prepared by the author

18

Tablo 5. Global Trends in the Automotive Industry1

Global Trend ExplanationEstimated

Application Period

E-Mobility/Hybrid-Electric Vehicles

20% of vehicles sold worldwide will be in the electric vehicle segment by 2025 [ODD, 2018] Radically supporting this area in the environmental regulations of the states in order to support green practices in the industry

1-5 Years

The Shifting and Disintegration of the Global Automotive

Industry Supply Chain Towards

Central and Eastern Europe

As result of the Covid-19 pandemic to make the industry clearly experience the procurement based on a single center, and this giving birth to quite significant risks to the production activities, moving a part of the supply chains of most of the major producers to Turkey, the Middle East and the Eastern European countries (Especially Turkey's advantage to have at this point in terms of logistics and supplier network available, competent human resources and knowledge are considered the most important because as an alternative.)

1-5 Years

Development and Integration of New

Generation Risk Management and

Forecasting Models

Using multi-criteria decision support models in risk and flexibility managementIntegrating into ERP programs in processes such as inventory management, production planning, procurement planning by developing adaptive and artificial neural networks-based forecasting models

1-5 Years

Fully Autonomous Vehicles

Fully autonomous vehicles to take their place in the market and quickly gain a significant market share by 2023 1-5 Years

Linked VehiclesDevelopment of vehicle electronics, embedded sensor technologies and communication technologies, which are the basis of technological developments

5-10 Years

Next Generation Supply Chain

Solutions

Providing mobility solutions such as automotive industry vehicle sharing and supply chain logistics with blockchain platforms 5-10 Years

Sales and Marketing Activities

Changing the dealership structure and carrying out vehicle sales and marketing transactions through online platforms or with augmented reality technologies

1-5 Years

Acquisition and Merger (M&A)

Activities

Creating economies of scale as a result of OEM mergers across the industry due to financial liquidity problems and high R&D costs.Establishment of cooperation initiatives between automotive companies and IT/Electronic companies

5-10 Years

New Business Fields

With the emergence of digitalization and connected tools, the emergence of new business areas and the significant change in the value chain (For example, the emergence of new departments or large-scale technology companies such as big data management, voice detection and control)Development of cyber security mechanisms in big data management processes, adaptive follow-up of legal regulations for the protection of personal data Formation of data economy departments as a result of the collection and processing of big data from connected vehicles and smart transportation systems, and the sale of the relevant data sets for preventive maintenance and/or insurance activities.

5-10 Years

5.2 Industrial Trends in TurkeyIt is observed that the automotive industry in Turkey has been positioned parallel with the global trends prescribed in Table 5 due to the large number of international companies located in the main and sub-industry company operating in the automotive industry. Particularly the global trends are closely monitored, both as stated in the Eleventh Development Plan and because the current operations of the industry are predominantly based on exports and are directly affected by changes in global supply chains. Both individual investments with companies as well as government support programs in Turkey's automotive industry to be among the leading countries of the world are planned. In this context, the general trends of the automotive industry in Turkey are summarized in Table 6.

1- UNDRR (2020); G20 (2020); Vaz vd. (2017); MS (2016); EC (2019); PwC (2020c); Deloitte (2020a); EY (2020); TAYSAD (2020)


19

Tablo 6. Turkey Automotive Industry Trends1

Global Trend ExplanationEstimated

Application Period


TOGG (Turkey Automobile Enterprise Group) to complete the domestic electric cars in the design in the IT Valley in Kocaeli - Gebze, start of mass production in TR42 Region (Gemlik, Bursa) and electric vehicles to take an important position on market as of 2023 Supporting this area in the state's environmental regulations and private consumption tax structures in order to gain importance and support green practices in the industry. Supporting the electric vehicle sales of other companies in the industry, and expanding the electric vehicle fast charging station network throughout the country. Electric vehicle market maturation, and as a result of the termination of the diesel vehicle production under compliance with EU regulations, especially OEMs operating in Turkey on all sides significantly to be affected industry and government to support the production systems in a radical way to allow changes(It is foreseen that some of the existing production infrastructure will be exported to regions such as Africa and the Middle East, which are expected to be unable to complete the transformation of electric vehicles simultaneously with developed countries in the near future, but investments in new generation vehicles are also expected to meet the demands of their existing customers in EU countries.)

3-5 Years

Shifting of the Global Automotive

Industry Supply Chain Towards

Central and Eastern Europe

As result of the Covid-19 pandemic to make the industry clearly experience the procurement based on a single center, and this giving birth to quite significant risks to the production activities, moving a part of the supply chains of most of the major producers to Turkey, the Middle East and the Eastern European countries (Turkey is particularly considered as the most important alternative with its advantages in logistics.) Increase in the promotional and marketing activities of the regional advantages carried out by the Investment Incentive Programs and TR Presidential Investment and Development Agency Investment Support Office in order to attract large-scale investments and manufacturers in the industry

1-5 Years

Localization of Imported Products

Supporting these areas by defining the areas (for example input raw materials) that should be taken into consideration as a priority in efforts to increase localization and provide the highest added value. (For example, supporting R&D activities for new generation sheets, engineering plastics, composite parts and reinforced aluminum parts that stand out in the field of raw materials)

5-10 Years

Development and Integration of

New Generation Risk Management and Forecasting

Models

Using the multi-criteria decision support models and new generation planning models/algorithms in 157 R&D Center in Turkey, which are mainly focused on the automotive industry, with the support of University-Industry Cooperations and the Ministry of Industry and Technology Ministry in Turkey [STB, 2020] in risk and resilience managementIntegrating into ERP programs in processes such as inventory management, production planning, procurement planning by developing adaptive and artificial neural networks-based forecasting models

1-5 Years

New Generation Fully Autonomous

and Connected Vehicles

Designing and implementing regional programs that support SMEs through the development and implementation of new technologies (sensors, batteries, powertrains, etc.) and increasing digitalization through TUBITAK, KOSGEB, Development Agencies

5-10 Years

Sales and Marketing Activities

Changing the dealership structure and carrying out vehicle sales and marketing transactions through online platforms or with augmented reality technologies

1-5 Years

1- OSD (2019); PROTEMA (2016); SETA (2019); TAYSAD (2020); PwC (2020c); Deloitte (2020a); EY (2020)

20

5.3 Industrial Trends in TR33 RegionThe automotive industry, which has an important place in the economic volume of the TR33 Region, includes the developed supply companies and it stands out as one of the leading regions in the automotive sub-industry of Turkey with its developed automotive industry-weighted OIZs. In line with the internal dynamics of the industry (for example, cooperation with foreign OEMs, intensive export activities to developed countries in the USA and EU, high density of medium/large companies that have completed their institutional transformation, etc.), it is observed that global trends are closely followed, especially in the region, and roadmaps and development programs are prepared for these trends through the OEMs. In addition, considering the industrial composition and logistics infrastructure advantages of the region, it is highly likely that it will become a production base for new products that will emerge in line with global trends and/or become a potential application area thanks to cluster collaborations. When the annual reports of the large-scale sub-industry companies in the region, especially the main industry companies in the automotive industry, in 2020 were examined, the results given in Table 7 were obtained regarding the innovative practices and trends in the region.

Tablo 7. TR33 Region Automotive Industry Trends1

Regional Trend ExplanationEstimated Applica-

tion Period

Transformation of Sub-Industry Companies for


Preparation of the sub-industry companies in the region for the transformation process from conventional vehicles to electric vehicles and attracting new players to the region and the production processes of high value-added product groups and/or bringing the existing players to TR33 Region As a result of the maturation of the electric vehicle market and the termination of diesel vehicle production within the scope of compliance with EU regulations, the entire supplier industry, especially OEMs operating in the region, to be significantly affected and production systems to change radically by benefiting from government incentives/supports Acceleration of initiative processes to make feasibility studies and to produce the transformation maps necessary for the establishment of new export channels to countries such as Africa and the Middle East, which are expected to be unable to complete the electric vehicle transformation simultaneously with the developed countries in the near future, and to make investments in new generation vehicles in order to meet the demands of existing customers in EU countries

5-10 Years

Automotive Supply Industry Cluster

Studies

Developing adaptive and artificial neural network-based forecasting models in six R&D Centers supported under the coordination of University-Industry Collaborations and the Ministry of Industry and Technology [STB, 2020a] and using them in processes such as inventory management, production and procurement planning, in risk and flexibility management by integrating them to the ERP programs in the processes.International collaborations, funding mechanisms, etc. concentration of activities related to the preparation and development of the industry for global trends by using resourcesAcceleration of promotion activities of regional advantages through Investment Incentive Programs, Chambers of Commerce and Industry, Organized Industrial Zones, ZAFER Investment Support OfficesEnsuring that the Innovation Center, established in Manisa, conducts joint studies with different sectors and tends towards value-added product groupsDue to the investment incentive advantages of the province of Kütahya and the relatively low investment costs, new investors from neighboring provinces (especially Bursa and Kocaeli) will be attracted and plans to establish a production base for the automotive sector in the province.

1-3 Years

1- OSD (2019); PROTEMA (2016); SETA (2019); TAYSAD (2020); PwC (2020c); Deloitte (2020a); EY (2020)


21

Combined Transport

Infrastructure Studies

Developing combined transport services with railway integration between İzmir Ports and Manisa/Bandırma/Gemlik Ports and Kütahya and bringing the logistics infrastructure to a position that will create an advantage for the region.Strengthening the connection of Kütahya to İzmir Çandarlı Port as an alternative to the ports in Gemlik Region and shifting some of the transportation activities to this axis.Developing the logistics center (MOS) under Manisa OIZ and making it the logistics hub of the Aegean Region

3-5 Years

Localization of Imported Products

Providing support mechanisms for R&D and production activities by determining the areas that should be considered as a priority in efforts to increase localization and will have the highest added value.(Bringing high value-added products to the regional economy by encouraging the localization of metal or plastic fasteners imported from especially the Far East.)

1-3 Years

R&D Activities for New Generation

Vehicles

Designing, implementing and implementing regional programs that support SMEs through TUBITAK, KOSGEB, ZAFER Financial Support Programs for the development and implementation of new technologies (sensors, batteries, transmission organs, etc.) Concentrating R&D activities, collaborations and funding mechanisms on the mentioned issues by using public-university-industry collaborations and foreign funded funding mechanisms to support the development of new generation composite materials and sheet metal products.

3-10 Years

Human Resources Competence and Capacity Development

Increasing the number of programs designed according to the technological and hardware needs of the industry that will arise in line with the global trends at the vocational high school, and associate, undergraduate and graduate levels of universities in TR33 Region and the development of practice-oriented professional development systems and programsFocusing on the efforts to increase the number of students enrolled in the programs by improving the technical infrastructure of the programs currently continuing their education. More effective use of Zafer Development Agency support programs by determining joint training and consultancy needs by private or public institutions operating in the automotive sector or related fields that will support the sector (for example, Basic and Advanced CAD / CAM Trainings for Mold and Machine Manufacturing, Process Management Training in Automotive, Cable Assembly Worker Training, Measurement Systems Analysis, CNC Lathe Operator Training etc.)

1-3 Years

Foreign Market Development

Actively cooperating with the industrial umbrella organizations in the region and helping companies with foreign trade consultancy or market researches with foreign trade centers that can be established in the umbrella institutions and organizations, especially the development of the export capacities of the companies in the industry and the maturation of new/alternative marketsIncreasing studies and consultancy for obtaining certificates for use in export activities of industry companies that produce throughout the region but do not engage in foreign trade activities and to improve their quality processes

1-3 Years

22

6. The Current State of the Automotive Industry 6.1. Primary Research Results

6.1.1. Survey Study

Within the scope of the survey study, the distribution of the surveys obtained specifically for the TR33 Region according to their industrial sub-breakdown is given in Table 8. The results of the surveys obtained from the province of Istanbul, which show results close to the region in terms of industrial maturity and dynamics, were also included in the analysis and then interpreted within the scope of the survey study carried out, due to the planning of data entries open to participation from all over Turkey and the insufficient number of surveys obtained from the TR33 Region.

Tablo 8. Distribution of TR33 Region Surveys Based on Sub Sectors

Sub-Industrial Breakdown TR33 Region Turkey Percentage

Rate

Manufacture of Motor Land Vehicles and Engines (Automobile, Light Commercial, Heavy Vehicle etc.)

(NACE 29.1)1 12 %8,3

Motor Land Vehicles Bodywork (bodywork); Trailer (trailer) or Semi Trailer (semi-trailer) Manufacturing

(NACE 29.2)2 13 %15,4

Manufacture of Parts and Accessories for Motor Vehicles(NACE 29.3) 20 68 %29,4

Total 23 93 %24,7

As shown in Figure 9, when detailed according to the NACE (v2) activity codes of the companies participating in the survey, approximately 87% of them operate in the production of parts and accessories for motor vehicles. In addition, approximately 83% of the companies participating in the survey from the region actively continue their export activities, and they are predominantly (approximately 39%) in the medium-sized company category (with a turnover of 25-125 million TL).

0Küçük Ölçekli Orta Ölçekli

İhracat Yapıyor İhracat Yapmıyor

Orta ÖlçekliBüyük Ölçekli Mikro Ölçekli

2

1

4

3

6

5

8

7

9

8

6

1

1

32

1

1

29.229,1 29.3

Figure 8. Export Status and Company Structure of the Companies Participating in the Survey


23

Approximately 52% of the companies that filled out the survey increased according to their turnover in 2019 and 39% compared to the export volumes in 2019. However, at the same time, it was stated that approximately 39% of them had a decrease in their turnover by up to 50% compared to the previous year.

When the participating companies are asked to prioritize the problems they experienced during the COVID-19 outbreak in the range of 1 to 6 (1: high priority, 6: low priority), it is observed that the main problems of the participating companies are related to the decrease in sales and production volumes. Cost increases related to labor and inventory management take the last place in this ranking.

1,0

2,4

2,6

2,7

3,9

4,7

4,8

2,0 3,0 4,0 5,0 6,0

Decrease in Prouction

Decrease in Sales

Decrease in Profitability

Problems in Labour Force Supply

Increase in Stock Costs

Problems in Logistics

Figure 9. COVID-19 Salgını Sürecinde Yaşanılan Problemler

When the main obstacles and bottlenecks that affect the operational processes of the companies are investigated, it is observed that the most frequently recurring problem is related to the access to qualified workforce. This obstacle is followed by financing problems and problems regarding the sustainability of production and infrastructure services.

0 2 4 6 8 1210 14

Access to Qualified Labour Force

Production

Raw Material Supply

Access to Financing

Situation and Cost of Infrastructure

Sales and Marketing

Export

Suppliers Making High Quality Production

Packaging and Logistics

Frequent Changes in Regulations

13

9

8

8

6

5

4

4

2

2

Figure 10. İşletmeleri En Fazla Etkileyen Ana Engeller ve Darboğazlar

24

During the COVID-19 outbreak, it is observed that the most basic problems experienced in raw material procurement processes are the delays in logistics systems, especially the excessive increases in product raw material unit prices and customs clearance problems due to the increasing demand due to the capacity reduction and/or production halts of the supplier companies.

0 5 10 15 20

Increasing Raw Material Prices

Prolongation of Raw Material Supply Times

Decreasing Prdictability of Raw Material Supply Times

Supplying of Raw Material from Alternative Sources

Lack of Raw Material with Desired Quality

Decreasing Stock Levels

19

17

15

6

6

8

Figure 11. Problems in Raw Material Supply Processes

As a result of the COVID-19 outbreak, approximately 39% of the participating companies reported that logistics costs increased between 26-50% and it was stated that approximately 8.7% experienced a cost increase of more than 50%.

When the future expectations of the companies are investigated, it is predicted that especially the market share will decrease as a result of the global financial shrinkage and with it, options such as the reduction of the number of overemployed personnel and/or the use of compulsory leave will emerge as a result of the close past or future production losses. In addition, it is expected to make use of financial support mechanisms and to reduce costs in order to be competitive in liquidity problems and sales/marketing channels.

0 2 4 6 8 12 1410 16

Decreasing Domestic/Foreign Demand

Utilizing Financial Support Packaes

Saving Planning/Implementation

Problems in Raw Material Supply

Integration of Risk Management Machanism

Loan Repayment Restructuring

Team Restructuring

Utilizing Remote Working Options Actively

Problems in Accessing Logistics Services

Tendency toward Alternative Product Sets

14

12

11

11

11

8

6

6

5

2

Figure 12. Short-Term Actions/Expectations of Companies


25

When other risk factors affecting the sustainable growth and competition levels of companies are questioned, it is predicted that the risks originating from COVID-19 will have a very high impact in the near future, as shared in Figure 14, but especially the introduction of new generation vehicles and the technologies they will bring into the system will affect the industry at a moderate level.

0 5 10 15 20

Demand Fluctuations Caused by Covid-19

Temporary Factory Shutdowns Caused by Covid-19

Excahnge Rate Fluctuations

Key Labor Loss Caused by Covid-19

Import / Export Customs Quota Practies

Lack of Faunding

Raw Material Interruptions in the Supply Chain

Financial Liquidity Problems

New Big Player Entering the Market

Activation of Online Sales Channels

Spreading of Technologies that can Communicate With Each Other

Big Players Exiting the Market

Active use of Autonomous Vehicle Technologies

Electric Vehicles Taking an Important Position in the Market

High MediumVery High Low Very Low Not Applicable

Figure 13. Risk Factors Affecting Sustainability

When the factors that will affect the competitive level of companies in the sector are questioned, especially the intense competition level and new restrictions to be applied come to the fore. These parameters are followed by the intense competitive environment that will bring the potential of doing business with a limited number of buyers and shifting to alternative producers by considering the price/quality index of the relevant buyers. In this parameter, it is also observed that the labor-based production systems in the industry, especially the pandemic-induced key personnel losses and technological transformation deficiencies, have a high impact on competitiveness.


0 5 10 15 20

Level/Intensity of Competition in the Sector

Additional Security Measures Caused by COVID-19

State Support not Sufficient / Effective

Low Productivity

Difficulty Accessing Finance for New Investments

Dependence on a Limited Number of Buyers

Existence of Equivalent / Substitute Products

Prohibitions, Rules and Regulations

Difficulty of Companies to Access Appropriate Technologies

Lack of Domestic Technical Skills

Dependence on a Limited Number of Suppliers

Anew Company's Entry intı your Market

Expansion of Remote Working Opprtunities

Figure 14. Factors Affecting the Level of Competition

26

When the transformation practices taken by firms in the face of the factors affecting their competitiveness are questioned, it is observed that the manufacturers tend to mainly increase efficiency in production systems. However, it is understood that they remain passive especially against energy management, environmental practices and social responsibility issues, and for the majority of companies, even if such applications are not applicable or implemented, their potential effects will have a very low impact on the competitive platform.


0 5 10 15 20

High-Tech Efficient Machinery / Equipment Procurement

Productivity Based In-House / Outside Training

Productivity Based Organizational Structure

Lean Manufacturing Techniques

Resource Efficiency

Socislly Responsible Product Manufacturing

Calculating Carbon Footprint

Production of Products with Energy Label

Green Product Manufacturing

Figure 15. Transformation Activities of Companies

When the strategies to be implemented by companies to maintain their sustainability and competitiveness in the face of global trends and developing new technologies are questioned, investments for digital transformation such as industry 4.0, modernization of production systems such as robotic systems and big data management come to the fore. However, it is observed that investment approaches against special product groups with high added value and requiring intensive R&D activities are quite low in the future strategies of the companies.


0 5 10 15 20

Implementing Industry 4.0 Applications

Increasing Digital Tranformation Activities

Integration of Big Data management Mechanisms

Invenstment in Sencor Technologies

Providing Sectoral Oartners (Merge&Acquisition)

Shifting the Supply Chain from East to West

Investment in Elelctronic Components

Investing in Strong Powertrains

Investing in Battery Techonologies

Figure 16. Future Strategies of the Companies


27

6.1.2 Focus Group Meeting

Uniquely for the provinces in the region within the scope of the focus group meeting held in TR33 Region provinces between 23/12/2020 10:15 - 12:30;

• Considering the automotive supply industry and the automotive production value chain in the province of Manisa, the production of products in a wide variety of fields and the development of a regional clustering initiative in the sub-industry

• In addition to the activities of the companies producing in the field of automotive sub-industry in Kütahya, it is observed that activities related to attracting investments from the provinces with automotive intensive production (Kocaeli, Bursa) in the surrounding area are carried out.

• As a result of the current situation assessment of the industry, the following findings have been reached;

• Although the companies operating throughout the region experienced partial production losses due to the COVID-19 pandemic, there were no significant sales/turnover losses since they mainly carried out export activities. It was stated that the production losses of the Far East-based competitors during this period were partially compensated by the companies in the region and this situation was reflected positively on the sales, albeit relatively, and/or the losses experienced as a result of partial closure were tolerated by this means.

• Instead of employees who moved away from the workplace due to the pandemic of COVID-19 in which all companies have top level of measures, alternative employment was provided when necessary, allowing production to continue without interruption.

• Due to the COVID-19 outbreak, serious supply difficulties were experienced especially due to the capacity reductions of Far Eastern raw material/intermediate product suppliers and the decisions to stop production. Due to the deterioration in the supply-demand balance, the raw material input costs have increased significantly and in this case, it significantly affects the financial sustainability of the companies.

• It was observed that medium/large-scale companies that invested in automation/digitalization areas prior to the COVID-19 pandemic and were able to implement flexible production strategies and make rapid supply chain revisions during the pandemic process were minimally affected by the process.

• It was observed that they had significant problems regarding the sustainability of production as a result of labor-intensive production companies, especially in the production systems, key personnel losses, long quarantine periods, etc.

• It was observed that the turnover/customer losses remained at a minimum level due to the long-term sales contracts of medium/large-scale companies with OEMs or 1st tier sub-industry companies and the slow and difficult supplier transitions throughout the industry.

• Due to the fact that the companies mainly benefit from the financial support programs provided by the state (breathing loan, partial work allowance, loan structuring, etc.) but these supports are not sufficient to cover the losses in the industry. Due to the fact that the companies tolerate liquidity deficiencies on their own, and this situation increases the financing costs of companies.

• The following findings have been reached by analyzing the positioning of the industry against global trends and current actions;

• It is foreseen that the representatives have low expectations for the supply centers in the Far Eastern countries to move to the Eastern Europe and/or to Turkey, as a major candidate, and that the Far East based manufacturing operations and procurement of raw materials, especially where recovery quickly with trade support of the Chinese Government, have increased and will continue to increase.

• It has been mentioned that electric vehicle options will take an important share in the market in the near future and that some R&D activities are carried out throughout the industry in order not to fall behind the competitors in this market, and the necessary studies are carried out in parallel with the sub-industry companies to be prepared for the demands from the main industry.

28

• It has been mentioned that the companies are highly participatory in the nationalization of imported products and some industry companies have some practices representing the region in this regard. However, it has been observed that companies throughout the region expect the main industry to guide the development of high value-added products or localization of imported products and do not take a pro-active approach to projects that will lead the industry.

• It has been observed that Kütahya is carrying out intensive activities to attract new players to the region by using the advantages of regional incentives and is preparing to take an important position in the production of value-added products and the nationalization of imported products in new areas that the electric vehicle market will bring with it.

• It is predicted that the region will support the needs that will arise as a result of global trends with the institutional capacity building and transformation programs planned to be implemented through the industrial cluster and innovation center in Manisa.

• Finally, the following findings were obtained by analyzing the basic deficiencies and development channels observed in order to improve the competitive level of the automotive industry in the region;

• It has been observed that the most basic need emerging throughout the region is the lack of blue-collar personnel and qualification deficiencies (language skills, lack of industrial experience, etc.). However, it has been observed that companies are negatively affected in terms of sustainable production and personnel development programs due to the high level of blue-collar mobility (between industries and/or between companies) in the region. In addition, it has been stated that there are no difficulties in the processes of attracting/keeping the talented workforce to the region for the white-collar personnel.

• It has been observed that there are effective, sustainable and product-oriented collaborations between public institutions-private industry-university. However, these collaborations are planned to be extended from the individual level to the institutional level, especially with the cluster management and innovation center located in Manisa.

6.2 Industrial AnalysisIt is positioned as one of the potential production bases of Turkey considering the factors such as that the automotive industry value chain of TR33 Region is the sub-industry companies that have developed especially in passenger and light commercial vehicle production and assembly activities; logistics infrastructure advantages of the region, cooperation with other industrial areas of the industry; and qualified workforce. The opportunities of the automotive industry in the TR33 Region against this vision and the threats to its development were examined in detail, and detailed analyzes were made to prepare the basis for the definition of medium/long term strategic goals that can be set for the region to become the leading automotive production base in the world.


29

6.2.1 TR33 Bölgesi Otomotiv Sektörü Değer Zinciri Analizi

Parts Design

Raw Material Supply

TechnologySupply

Production

R &D Production Marketing Service

Assembly marketing SalesAfter Sales

Insurance Service

Finance Services

Logistic Services

Sub Tier Suppliers Main Prıoducers Dealers

Maintenance&Repair

RecycleIntermediateProductSupplyTechnology

Design

Figure 17. General Value Chain Flow of the Automotive Industry1

As shown in Figure 18, the raw materials (plastic, rubber, chemicals, iron, steel, etc.) and intermediate products that companies will need in their production processes (textile, chemical, rubber, plastic components, electronics, batteries, brakes, gearboxes, etc.) continue to be procured through local and/or imported suppliers based on long-term and strong relationships starting with the R&D/design processes made by considering the future projections of the automotive industry value chain companies. Parts supplied through sub-industry companies and import channels (an average of 6,000 pieces per vehicle [TSKB, 2018]) are assembled and presented to the end user through sales channels. Activities such as vehicle maintenance/repair in after sales operations; insurance; recycling take their place in the process as the last links of the chain. In addition, activities such as logistics services (supply logistics, operations, shipping logistics, etc.); financial services; human resources and business management are determined as support providing activities.

The automotive industry operating in TR33 Region is globally competitive with its export volume to global and developed markets in intermediate product production and marketing, the mature sub-industry production structure that will meet the quality and operation expectations of international large-scale main and sub-industry players, and a well-trained human resource pool. However, it operates in high volume but low value-added product groups due to the capacity utilization rates of the industry, existing technology and R&D infrastructures, and the lack of digitalization and data management mechanisms on the supply chains. Due to the labor-based production structure and high input costs (raw material, energy, logistics etc), industry companies that continue their activities at a very critical threshold in terms of profitability face the risk of losing their current competitiveness, especially due to foreign dependency on raw materials and fluctuations on input costs. However, especially considering the current high exchange rates of export-oriented companies, labor costs have reached a more advantageous position based on Euro compared to the Eastern European countries, which are Turkey's biggest competitors in the industry, and again in a global competitive environment with relatively more advanced logistics infrastructure opportunities.

6.2.2 TR33 Region Automotive Industry PESTLE Analysis

It has been used as an important input source in identifying opportunities and threats for short, medium and long term strategies to be created specifically for the automotive industry by evaluating the impact of macro developments occurring on political, economic, sociocultural, technological, legal and environmental scales on the automotive industry in TR33 Region. As a result of the focus group meeting, the survey study and the secondary data analysis processes, the shared outputs in Table 9 were obtained. It is observed that the main threats to the automotive

1- Yazar tarafından hazırlanmıştır

30

industry in TR33 Region will emerge especially at the political and economic level. It is foreseen that the environmental, climate, security-related regulation changes that occur in EU countries where the majority of the industry companies in the regional ecosystem carry out their export activities, and the adaptation problems and additional costs that will occur in the adaptation process to the industry will significantly affect the competitive level of the industry. In addition, it is known that uncertainties in macroeconomic parameters have significant effects on the national market volume of the industry, and it is predicted that the industry's domestic market activities will be significantly affected if there is no stagnation on the relevant parameters. However, considering the constraints such as the current industrial infrastructure, the number of qualified personnel, and the quality approach, especially in the transformation process that will occur as a result of global trends, it is observed that there are important opportunities in the processes of technological transformation and bringing value-added products to the regional economy. Thanks to the geographical advantages of the region in terms of logistics and supply chain, it is predicted that the socio-cultural, technological and environmental expectations of the industry can be met quickly and in a value-added manner with the State's interest in this matter, financial and legal support mechanisms; high numbers of staff generating innovative ideas that will quickly adapt to the transformation process of universities and the industry.

Tablo 9. PESTLE Matrix of TR33 Region

• Regulations on security and data management• Emission protocols / regulations Customs

taxation / quotas• Special consumption tax rates• State's supporting the high value-added

production and nationalization processes intensively and actively under different funds.

• Autonomous vehicle technologies• The presence of hybrid / electric vehicles in

the market• The development of sensor technologies• Development of big data management

mechanisms• Emergence of new research areas in sound

management and precision• Application of digital transformation strategies

• Carbon emission rates (carbon neutral)• Cessation of diesel vehicle production• Using environmentally friendly fuel

technologies• Green themed certificates becoming

widespread• Scrap incentive programs• Increasing the use of recycled products in

vehicle production

• Protection of Intellectual Property Rights• Protection of personal data, driving/vehicle

data• Lack of certainty in regulations for M&A or

JV activities

• Disposal of car scrappage• Increasing input costs (labor, energy,

etc.)

• Environmentally conscious generations using electric vehicles or alternative means of transportation (scooter, bicycle, etc.).

• Vehicle use being an indicator of prestige• People turning from mass transport to

individual vehicle alternatives after COVID-19.• Supporting of safe driving with developing

in-vehicle / outside sensor technologies and reducing of the injury / death rates in accidents

Political

Technological Environmental Legal

Economical Sociocultural


31

6.2.3 SWOT Analysis for the Automotive Industry in TR33 Region

With the aim of improving the position of the automotive industry, one of the leading industries of TR33 Region, increasing the sustainable global competitiveness and transforming it into a structure with high added value, where the use of advanced technology is predominant, the industry's stakeholders' surveys and focus group meetings, and its shortcomings are discussed and summarized in Table 10.

Tablo 10. SWOT Matrix of TR42 Region

STRENGTHS WEAKNESSES

•Rich logistics infrastructure facilities (Gemlik Ports, Highway Connection Axes etc.)• Well-rooted industrial infrastructure and leading companies in the field (sectoral knowledge and experience + intensive foreign trade activities)• Finding international automotive sub-industry companies and having a wide range of products • Wide opportunities for university-industry cooperation + 55 Automotive R&D Centers• Active performance of the automotive supplier industry cluster• Active/integrated working environment with local governments and umbrella organizations (TAYSAD, etc.)• Attracting qualified workforce to the region

• SMEs not allocating funds to corporate transformations such as R&D and Innovation• Production of low value-added and volumetric products (kg/$)• SMEs not providing qualified workforce and qualified employees’ preferring large-scale companies in the region • Lack of partnership and co-business culture in SMEs

Fırsatlar Tehditler

• The strategy of the main industry to direct local supplier companies that offer low cost-high quality alternatives in new projects containing high value-added parts produced in Far Eastern countries.• Supporting the infrastructure that will respond quickly and adaptively to the rapid prototyping needs of OEMs and industrial transformation processes• Potential cooperation opportunities in the Electronics, Automotive and Informatics sectors Turkey's potential of being a global logistics center and new players entering the market• Increasing of localization efforts with Parts Equivalent Certification system, etc. incentives and supporting supply industries • Production of TOGG in the Region and the investment and cooperation network it will create in the future

• THREATS• Increased energy, taxes, etc. input costs• Sudden exchange rate fluctuations• Policy instabilities (SCT revisions, environmental regulations for carbon emission, ADR regulations, EURO 6 engine use, diesel consumption, etc.)• Increasing labor costs due to COVID-19• Financial contraction and liquidity problems caused by COVID-19

6.2.4 Five Power Analysis for the Automotive Industry in TR33 Region

The “Five Forces Model” proposed by Michael Porter is used for defining the risks and threats that will occur for new companies entering the industry in the process of determining the severity and impact of strategic competition in the automotive industry; defining the competitive environment between existing competitors and the substitutes in the industry; and making general evaluations about the bargaining power and preferences of buyers and suppliers. In this context;

A. In terms of New Enterprises to the Industry (Weak)

The automotive industry is not a industry with a high profit margin that can be invested quickly due to intellectual property rights, patent maturity, quality expectations, economies of scale created by current global companies and high investment capital requirements. However, there are potential market opportunities for companies that will enter the industry, especially for new product groups that will emerge for new generation electric/hybrid vehicles. The relevant companies can find place in the value chain of the automotive industry by taking advantage of the incentive programs provided by the government in the still immature market for innovative and high value-added product groups (sensors, electronic components, software, etc.).

32

B. Bargaining Power of Customers (High)

It is observed that the bargaining power of individual and corporate customers, who are at the end of the value chain of the automotive industry, is quite high. It is observed that, as a result of presence of many alternative vehicle options in the price-quality index and the high customer satisfaction expectations, customers' sense of belonging to brands decreases and they tend to alternative brands where they can get better service with lower cost and higher quality. In addition, the new generation vehicle segment creates a risk for companies that produce conventional vehicles due to the increasing safety expectations of end customers and their environmentally sensitive approach.

C. Bargaining Power of Suppliers (Weak)

It is observed that the bargaining power of the sub-industry companies serving the main industry of the automotive industry is weak. Although the supplier switching costs of OEMs or 1st tier large sub-industry companies are high, it is expected to offer high quality with low profit margins due to the high number of alternative suppliers in the market. In addition, high costs arise due to the control mechanisms on the supplier companies, high stock expectations, worker training, and certification expectations. However, it is observed that their bargaining power is at a moderate/high level due to the lack of an alternative producer pool for suppliers involved in the production of key components of new generation vehicles and the advantages provided by intellectual property rights.

D. Similar Product Threats (Moderate)

It was observed that similar product threat is at a medium level in the final product groups belonging to the main industry. It is intermediate, as hardware packages that meet customer expectations are standardized and the advantageous services provided by companies during and after sales. However, due to the environmental approach of new generation users, alternative product groups such as electric scooters and bicycles show an increasing trend in individual transportation activities. Again, the electric vehicle segment seems to be a serious risk factor for conventional vehicles. Considering the sub-industry, the vehicle change rates are not found to be very high in the industry due to the length of quality approval processes and increasing cost pressures. Therefore, the risk of alternative product groups appears to be low/medium. However, it is predicted that conventional vehicle-oriented product groups such as engines, plastic parts and exhaust will be at high risk with the activation of the electric vehicle segment.

E. Risks Created by Existing Competitors (High)

There are financial and operational risks created by global companies with high brand values. In particular, innovative solutions to be brought by companies with high R&D budgets; financial support they will provide in sales processes; after-sales service network; supplier transfers etc. may cause significant changes in the current market distribution. Likewise, the adoption of the domestic TOGG vehicle by the society and the relative support of the special consumption taxes on vehicles with new generation fuel technologies may create tax, cost and market advantages in the coming years. This situation poses a high risk for companies that mainly operate in conventional vehicle production in the region.


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Competitors(-) Existence of a Large Number of Players with High Brand Value(-) Government Support for TOGG automobile (-) Low Price, High Quality Expectations(+) Availability of Innovative Solutions for New Generation Vehicles(+) Integration of New Generation Production Systems

Automotive Producers (Main and Supply Industry)Automotive Dealers

Auto Service and Spare Parts OperationsInsurance CompaniesLogistics CompaniesFinance Institutions

Bargaining Power of Buyers

Bargaining Power of Suppliers

Substitute Products and ServicesNew Companies Entering the Sector

(+) High Investment Capital / Know-how requirements(-) Existence of High Brand Value Players(+) High Quality / Finance / Design Reference Expectations(+) High Supplier Switching Costs(+) Immature Market / Small Number of Suppliers for New Generation Vehicles(-) Cost-Oriented Purchasing Processes(-) Increase in Vehicle Sharing Tendency(-) Alternative Transportation Opportunities Brought Together by the Environmental Approach (Electric Scooters, Motorcycles, Bicycle etc.)

(-) High Investment Capital / Know-how requirements(-) Existence of High Brand Value Players(-) High Quality / Finance / Design Reference Expectations(-) High Supplier Switching Costs(-) High Product Diversity(-) Lack of Economies of Scale in Purchasing / Sales Processes(+) Government's Investment Incentive Programs(+) Industry's being open to Innovative Products(+) The Sector's tendency for Radical Transformation (Development of Electric, Autonomous, Connected New Generation Vehicles, New Product Groups / Systems)

(-) Low Profit Margins(-) High Quality / Finance / Design Reference Expectations(-) Expectations for Fast Cycle Times(-) High Stock Expectations.(-) Existence of a Large Number of Small / Medium Sized Firms(-) High Number of Alternative Suppliers in Conventional Vehicles(+) Low Number of Alternatives in High Value Added Products of New Generation Vehicles(+) High Profit Margins in Key Product Groups in New Generation Vehicles

Individual CustomersPublic / Private Enterprises

(-) Low Cost, High Quality Expectation(-) Existence of High Competition Conditions with Alternative Product Providers(-) Expectations for Fast Response Times(-) Low-Rate, High-Term Financing Expectations(-) High Private Consumption Taxation System of the Government(-) High Exchange Rates(+) High Demand for New Generation Green and Safe Vehicles (+) Increase in the Number of Individual Vehicle Use as a result of the COVID-19 Outbreak(+) Use of New Generation Sales / Marketing Methods

Figure 18. Porter 5G Relation Matrix

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6.3 Gap Analysis for the Automotive Industry in TR33 RegionBased on the data obtained as a result of the survey study and focus group meeting conducted specifically for the TR33 Region, the operational and technological deficiencies/risks that arise at different stages of the value chain of the automotive industry are shared in Table 11, and it is aimed to form the basis for the strategies to be developed specific to the region.

Tablo 11. Gap Analysis of TR33 Region

Foreign Trade and Sales

• Small/medium-sized sub-industry companies remain ineffective and passive in developing foreign trade activities• Failure to carry out foreign market analyzes against product groups that do not have high volumetric burden but high added value (USD/kg) and to create alternative markets (South America, Africa, Middle East, etc.)• Inadequacy of the infrastructure and combined transport operations in order to increase manufacturers' competitiveness levels in the area of logistics (for example, the producers in the region have to use the land transportation for bringing the products they have brought into Turkey via rail or marina transportation, however, production and transportation costs in import and export activities and their times could be reduced significantly with the applications of special line carried out on the railways in Turkey)

Human Resources

• Existence of high number of personnel turnover due to lack of qualified blue-collar personnel and lack of ownership in the region as result of the implications obtained from the focus group meeting• High employment costs of white-collar personnel with sufficient experience and competencies in the automotive industry and inability to employ the relevant personnel due to the fact that they do not prefer SMEs with relatively low brand value • Having the risk that some provinces (for example, Kütahya) cannot find sufficient qualified personnel due to their socio-cultural opportunities in the face of the region's strategy of attracting investments of sub-industry companies that produce technology-intensive, low-volume and high value-added production• Program and industrial application deficiencies for new generation vehicles in vocational high schools and vocational schools • Low number of female employment, especially at management levels• The fact that small/medium sized companies operating under the sub-industry have not completed their corporate transformation and are still following sustainable professional development because they are still being run as family companies. • Having significant problems regarding the sustainability of production as a result of labor-intensive production companies, especially in the production systems, key personnel losses, long quarantine periods, etc. • Global crises such as the COVID-19 pandemic and/or lack of crisis management teams to evaluate the risks that will have a breaking effect on the supply chain that will occur at the local level and to create adaptive action plans (although the automotive industry has developed risk management processes in the face of global crises, lack of professional crisis/risk management departments or teams within the companies (especially SME scale))


35

Business Processes and Technology

• Production systems of SMEs operating under sub-industry are not adapted to flexible production systems (MES, VMI software, etc.) and robotic technology/IT investments remain incomplete• The fact that new product development, testing and approval processes take a very long time throughout the industry and their distance from new entrepreneur companies that can serve in technology and product supply processes to large companies in the industry• Lack of service network in the provinces of companies with strong technological infrastructure in the region where they can have regular or urgent maintenance/repair of their equipment.• SMEs operating under the sub-industry do not use end-to-end integrated software such as ERP, CRM due to high cost and technology adaptation problems in their supply chain management and planning processes and/or only use modular systems for key operations instead of integrated systems. • Failure to fully implement lean and agile transformation methods, resulting in high operational, stock and waste costs and environmental impacts.• SMEs delaying or canceling investments related to the improvement of production capacities and technological modernization, which are especially necessary to increase their competitiveness, due to high capital requirements and liquidity problems.• Significant increase in logistics costs and supply times due to the difficulties in the logistics processes experienced by the companies in the region, especially during the COVID-19 outbreak (excessive waiting times outbreak in port and road customs, and container/trailer supply difficulties, etc. due to the COVID-19)• Motivation and financial deficiencies in shaping the company cultures to offer solutions (data analysis, digital systems, etc.) for new generation products in the light of global trends of the sub-industry companies in the automotive value chain throughout the region.

Financial and Administrative Processes

• Considering the competitors of the sub-industry producers operating in the region in Eastern Europe and Far East countries, both the high energy input costs and the extreme fluctuations in macroeconomic parameters significantly affect the competitive level of the industry and the lack of financial support mechanisms in these areas.• Lack of the common working culture of the sub-industry companies in the region and the deficiencies experienced in the processes of joint development and production of high value-added products or products• Difficulties in finding new customers due to the long-term sales contracts of medium/large-scale companies with OEMs or 1st tier sub-industry companies and the slow and difficult supplier transitions throughout the industry.• Credit supports provided by Eximbank to exporting companies could not be applied to the sales channels of the same firm belonging to group companies residing abroad and VAT refund receivables were significantly reserved within the scope of loan transactions and as a result of this situation, the financial sustainability of the companies was negatively affected.• Failure to sufficiently follow product and process standards and CE/ISO certifications• Lack of infrastructure and manpower to follow the process regarding what kind of additional sanctions/measures should be taken by the small/medium-sized companies in the region against the regulation changes such as environment, security and data management in the EU and American markets where the majority of foreign trade activities are carried out, and Adaptation difficulties to be experienced in the transformation process • The fact that the parking age of the industry is much higher than the EU average and the difficulties that it will bring especially in safety and environmental issues (for example, the scrap vehicle regulation and government incentives in this regard are insufficient)

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TR33 Region is compared with other automotive production-intensive regions in Figure 20. It was observed that the TR33 Region;

• The is one of the regions with the most advanced production, logistics infrastructure and technology development of Turkey in the automotive sub-industry;

• The producer firm throughout the region, especially in terms of financing opportunities, company scales and foreign trade volumes, closely followed the players in the Eastern Marmara Region and held a leading position in some areas;

• It is observed that the region has a leading position in the Turkish automotive industry with capacity building, access to human resources, university-industry collaborations, clustering activities and the maturity of R&D centers and it closely follows the established arrangements in Easterm Marmara Region.

TR33 Region closely follows the leading regions of the automotive industry (TR42 and TR42 Regions) in terms of R&D studies, public-industry-university collaborations, training programs, industry infrastructure supports, quality management mechanisms, patents and branding numbers. Important steps are taken to increase the competition level of the sector in Turkey and in the region by considering good practices in the relevant regions as role models.

Foreign Trade

Human Resource

Supply chain management

Financing CondştşonsTechnological Level

Production Infrastructure

R&D Infrastructure

Logistics Infrastructure

TR42 (BEBKA) TR33 (ZAFER)TR42 (MARKA) TR71 (AHIKA)

Figure 19. Regional Gap Analysisi


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7. Horizontal IssuesIt is observed that most of the Sustainable Development Goals (SDG) defined by the United Nations under the universal call for action in order to eliminate poverty, ensure sustainable growth and development, while ensuring the peace and prosperity of all people at the global level, coincide with the current transformation strategies of the automotive industry. Some issues that cut regional development and development on a horizontal axis and support sustainable production activities specific to the automotive industry (for example, crisis management, energy efficiency and circular economy, climate change, gender equality) were evaluated considering the sustainable development objectives defined by the UN.

7.1 Crisis ManagementThe strong negative impact of the COVID-19 outbreak on the global automotive supply chain was felt similarly for companies in the TR33 Region. In particular, the main and sub-industry companies operating in the region had to close their production lines between March and June 2020 as a result of the breakdown of the supply chain starting from China, which is the main raw material/semi-finished product supplier of the automotive industry. In this process, most of the companies have benefited from the financial support packages of the state (short-time working allowance, breathing loans, loan configurations, etc.) and made decisions for their employees to use their annual leaves and/or to increase their flexible/distance working practices. As of June 2020, there is an intense increase in demand, as people prefer individual vehicles instead of public transportation and banks make significant reductions on vehicle loan interest rates. Most of the dealers have postponed their resumption dates in order to comply with the requirements of the local governments in force due to the pandemic, to protect the health and safety of the personnel and to prevent the congestion in the sales points and they continue their operations with shorter work hours as of June 2020. This situation had a particularly negative impact on new vehicle sales. The slowdown in customs processes due to diluted overtime practices due to pandemic conditions, disease-related personnel shortages, indirectly leads to significant problems in the raw material/intermediate product procurement processes of companies. As a natural consequence of this process, all producer stakeholders in the automotive industry are in the 9. They invest or plan in robotic systems that will minimize human-based risks by modernizing their production systems in line with the purpose (Industry, Innovation and Infrastructure). In addition, the companies conduct technology-based scientific research to find solutions to economic and environmental problems, improve them and increase operational efficiency.

7.2 Resource EfficiencyIt has become a pioneer in the industry with the transition to fully automatic production systems (digital transformation), integration of lean/flexible conversion systems, high R&D investments and sensitivity to environmental factors (circular economy) as a result of the sustainability studies in the automotive industry in recent years. This situation is in parallel with the outputs obtained from the survey conducted for the automotive industry in TR33 Region (see. Figure 16).

It is observed that the companies operating in the industry closely follow both national and international (especially EU) regulations, continue their supply chain activities and take important actions in the following areas by showing proactive approaches:

i.Elimination of wastes generated in production processes and reduction of wastes on site;

In addition to the full-time production mechanisms of the sub-industry companies throughout the region, minimization of cost and environmental impacts are among the main targets. Particularly it is ensured that waste products (atmospheric emissions, wastewater, solid and hazardous wastes) that may arise in production and storage processes are reduced and/or disposed of in accordance with the defined regulations with lean conversion systems, quality standardization and advanced prediction models within the system.

It was planned to allow the waste to be reused by another company without disposal by providing waste exchange between companies by trying the industrial symbiosis mechanism, which has been a popular concept in the recent years and have been applied in pilot practices, in Manisa Organized

38

Industrial Zone (for example, collecting waste metal parts generated as a result of cutting metal materials in sheet metal processing plants and utilizing them in other metal processing companies after melting operations). In this way, both environmental impacts (carbon footprint) will be reduced, and waste management costs of the regional companies will be reduced by creating economic value.

ii. Use of recyclable raw materials;

With help of the sensitive approaches and policies of consumers and governments on environmental issues, manufacturing companies operating in the industry have also begun to shape their own company policies in line with this perspective, and the automotive industry stands out as a leading industry in the field of environmental impact assessment and environmental protection. In particular, the European Union's strategies that support the use of recycled materials at certain rates in vehicles in recent years are actively followed by the main and sub-industry companies in our country. Plans are made taking into account the principles regarding reuse and recycling rates in new vehicle production and new vehicle designs. It is provided to produce both environmental and economic added value by using recyclable, recyclable and reusable materials that can be obtained from end-of-life (scrap) vehicles.

iii. Energy efficiency studies

In order to present the “green” concept, which has become an important part of the sales and marketing strategies of companies in the automotive industry, energy efficiency studies have begun to take place in the daily performance indicator sets of the companies. Advantages such as efficiency, energy and time savings, detailed measurement and reporting are provided with the digital transformation and automation technologies occurring in the automotive industry. In addition, in line with the "SDG 7, Accessible and Clean Energy", the manufacturers try to meet some of their energy needs with renewable clean energy sources, especially by using solar panels.

7.3 Climate ChangeIn the recent years, the increase in the awareness of consumers to buy environmentally friendly products has also radically affected the automotive industry in addition to the increase in environmental problems in the world. Aware of this impact, automotive companies have started to focus on products that are environmentally friendly as well as reduce energy costs and minimize climatic damage, with an understanding of environmental awareness and sustainability. Particularly after the implementation of Kyoto Protocol, less carbon emissions have been targeted in the automotive industry and as a result, the need for new engine and vehicle technologies has grown. In addition, the automotive industry has serious studies on environmental factors in order to set a "zero emission" [EC 2019] target by 2030 and adopt new carbon dioxide emission standards for vehicles with the "Green Consent" agreement that the EU has recently accepted. Considering that approximately 80% of our country's automotive exports are directed to EU countries, it is important to take steps in the automotive industry in line with the new climate management targets defined by the EU. Automotive industry companies operating in TR33 Region support the production of an environmentally friendly, economical, low fuel consumption but high performance TOGG vehicle. In addition, the activities/practices carried out by the companies in the region regarding environmental and climate issues are summarized below:

• It is observed that the producers in the TR33 Region deem beneficial the studies on green certified product production, measuring and monitoring the carbon footprint, converting energy systems into renewable systems or supporting energy efficiency studies in production lines, but they postpone their investments in the fields and shift their priorities to increasing their financial and production efficiency due to the uncertainty created by the COVID-19 pandemic and fluctuations in macroeconomic parameters.

• The environmental impacts caused by the use of motor vehicles are tried to be minimized by changing the industry within the scope of international protocols. For example, the obligation to use EURO 6 standards, which significantly reduce carbon emissions in heavy vehicles, has been introduced.

• Prohibition of the use of diesel engines, which provide 10 times more harmful gas emissions than gasoline-powered vehicles in passenger cars in Europe's leading countries, is also one


39

of the important actions to reduce carbon emissions. Likewise, the stratification algorithms on the special consumption taxes regulated by the Ministry of Treasury and Finance encourage consumers to prefer conventional and electric vehicles with low engine volume, which allow low carbon emission.

• It is thought that the transformation of oil-derived fuel sources into hybrid energy in the short term and into electrical energy in the medium term will also significantly reduce the environmental impact of the industry. In this context, it is important for our existing manufacturers to turn to alternative energy vehicles and to attract new alternative energy vehicle investments that will make a difference in the new automotive eco system in our country. In line with the EU's “zero emission” target by 2030, electric vehicles will be significantly encouraged and it is planned to establish 1 million public charging points across Europe by 2025 [EC, 2019].

7.4 Gender EqualityBased on the World Economic Forum's Global Gender Gap Report, published in 2020 [WEF, 2020], Turkey ranks 135 among 153 countries on labor participation. According to the same report the number of professional and technical workers in terms of the ratio of the number of men working in Turkey, the number of female employees is approximately at the level of 67%. According to the survey study conducted by OSD in 2018, the rate of white-collar female employees working in the automotive industry was found to be 25%, which is above the rate of white-collar female employees working in the industry (23%). Increasing women's employment is seen as one of the most important steps to be taken to overcome the “talent crisis” in the automotive main and supplier industry. The reason for this situation is that 95% of white-collar female personnel working in the industry have a university or higher education. Women managers are supported by mentoring and development programs, especially in order to balance the composition of men and women at management levels [Siyahhan, 2018].

In the well-attended survey study conducted by Deloitte in 2018 [Siyahhan, 2018], the industry-related evaluations of 1.143 white-collar women employed in the automotive industry were obtained and the results were compared with Deloitte's results in previous years, with the participation of 200 European and 330 American women. As a result of this study, the automotive industry shows a male-dominated profile. Besides, when its internal dynamics are examined, it is seen that the industry is fair. In the evaluations made, the rate of those who think equal performance is expected from women and men during the operations is 44%, and the rate of those who think higher performance is expected from women is 31%. The proportion of those who think higher performance is expected from women is 55% and 92% for Europe and the USA, respectively. It is observed that there is a fair distribution to a large extent in the automotive industry in terms of remuneration of white-collar female employees.

In addition, based on the survey study carried out in TR33 Region, the rate of the female employees was found to be approximately 20.4% in the total number of employees in the automotive industry and it has been observed that this figure has increased up to the level of 33.2% considering only the white collar employees. However, when both rates are taken into consideration, it has been observed that the ratio of female employees in the total employee in the region is approximately 2% below the average of Turkey (21.3% female employees among the total employees and 35.4% female employees among white collar employees).

Equal Opportunity Model Certificate, which is given by the Association of Women Entrepreneurs of Turkey to the companies that implement the gender equality approach in the process of recruitment, education, career planning, is given importance by the automotive industry's medium and large scale industry companies.

In addition, it is encouraged specialization International Labor Organization which provider and Turkey Automotive Care Association of female workers employed in the automotive industry by making gender inequality assessments by the Federation and more active participation of women in their management positions related to the work of the United Nations world.

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8. Short, Medium and Long Term Strategies and Action PlansThe industrial strategies were defined under 5 main headings with the purposes of: The automotive industry, which is one the most important industries with its employment, production and foreign trade volumes in Turkey and TR33 Region to;

• Have increased level of competition by catching up with global trends;

• To include design, development, production and/or rapid integration of new products that will emerge on a global scale into the regional ecosystem;

• To exhibit more flexible and adaptive approaches in the face of fluctuations and breakages that may occur in supply chains.

Both primary data sources (survey results and focus group meetings) and secondary data sources were used in the design and development of relevant strategies, sub-strategies and action plans. Especially the upper-scale strategy documents prepared for the industry (11th Development Plan Automotive Working Group Report [Ministry of Development, 2018], Turkey Automobile Industry Strategy Document and Action Plan (2016-2019) [STB 2016] and TR33 Coast Plan (2014-2023) [Zafer 2015] etc.) have been used.

Use of New Generation Sales Methods

Revision of Existing Logistics Systems

Adjustments for Capacity/Stocks/Workers

Financial and Liquidity StabilizationFin

ans

Prod

uctio

nInf

rastr

uctu

reSa

les/M

arke

ting

Taking Cost-Reducing Precautions in Production

and Supply Processes

Developing Supporting Mechanisms for Imported

Substitutes and New Generation Technologies

Revision / Postponement / Switching of Investments

Transition to Sharing Economy (Performing

IT, Electronic Production Services with Same

Companies)

Long-Term 3-10 YearsMid Term (1-3 Years) Short Term (0-1 Year

Developing Supplier Risk Management Mechanisms

Implementing New Generation Supply Chain

Management Optimization Models

Transformation into Productive Lean Flexible

Production

Ensuring Digital Transfor-mation

Developing Charging Station Network for

Alternative Fuel Vehicles

Transforming the Transpor-tation Infrastructure into a suitable form for combined

transport

Integration of ITS systems Creation of Smart Cities

Developing Customer Oriented Sales Strategies

Integration of New Products into the Market

Developing Dynamic Pricing Mechanisms Transformation into Flexible

Business Models

Integration of Innovation Management and Design

Oriented Thinking MethodsMergers & Acquisitions

(M&A)

Developing Business Processes with Artificial Intelligence Algorithms

Figure 20. Positioning Actions in Different Spaces and Time Intervals1

1-Prepared by the author


41

Developing Training and Consultancy Programs

Strategy 1.Skills and Capacity

Strategy 2.R&D Infrastructure

Strategy 3.Physical

Infrastructure

Strategy 4.Legal Regulations

Strategy 5.Financial Arrangements

Developing New Generation TechnologiesDissemination of Test and Perfection

Centers

Integration of Value Added Systems

Improving Operational Infrastructure

Improving Infrastructure for New Generation Markets

Supporting of Foreign Trade Activities Supporting of Industrial Development Improving Industrial Productivity

Developing University – Industry Cooperation

Increasing Industrial Design and Branding Forming and Developing Sectoral Clusters

• Developing light and durable materials• Technologies related to autonomous and

connected vehicles• Technologies in the field of electronics and

software

• Vocational Training Programs• Internship and Application Intensive License

Programs• Personnel Competency Programs

• Industrial Robotics in Manufacturing Systems• Flexibility and Risk Management Software in

Supply Chains• Environmentally Friendly New Generation

Technologies

• Increasing the number of automotive OIZs• Increasing the number of Auto-Ports• Transforming the Transportation Infra-

structure into a suitable form for combined transport

• Developing Charging Station Network for Alternative Fuel Vehicles

• Integration of ITS systems

Adaptation to International Regulations

• Climate Change Adaptation Packages• Type Test and Inspection Certificates• Regulations for Recycling and Scraps

• Supporting of fairs in Iran, Africa and Middle East

• Use of electric vehicles in public procurements and leasing

• Regional Incentive Packages• Providing supporting loans

• Loan Support for Digital Transformation• Support for procuring import substitutes• Incentives for energy, labor and input costs• R&D support for New Generation Techno-

logical Products

Revising National Regulations

• Tax and Foreign Trade Regulations for Vehicles using Environmentally Friendly Fuel Technologies

• Regulations for technology, innovation and human resources

• Developing University / Vocational High School Research Infrastructure

• Funding of joint national / international R&D projects

• Designs for imports• TOGG branding• Supply Industry Transformation Programs

• Increasing the number of clusters in supply industry

• Developing the competencies and capacities of existing

• Vocational Training Programs• Internship and Application Intensive

License Programs• Personnel Competency Programs

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Tablo 12. TR33 Region Automotive Industry Strategy and Action Table

Strategy Sub Strategy Actions Explanation Estimated

BudgetApplication

Term

Stra

teg

y 1

Skill

and

Cap

acit

y B

uild

ing

Strategy 1.1Develop-ment of Training

and Con-sultancy

Programs

Action 1.1.1 Designing and Implementing

Vocational Training Pro-

grams

• Supporting blue-collar intermediate staff/employee qualifications with vocational training • Some training programs carried out

under the BEBKA Technical Support Program (For example, Sheet Metal Mold Training, Style-to-Vehicle Plastic Injection Mold Process Training, Auto-motive Part Commissioning/Project Management System Training, CNC Lathe Operator Training, etc.)

• Designing and delivering practice-ori-ented vocational training programs to meet the expectations of the industry within Eskişehir Chamber of Industry Vocational Training Center (ESO-MEM), which was realized in Eskişehir with BEBKA Guided Project Support.

• Identifying and monitoring measurable performance criteria (for example, the in-ternship period of automotive graduates of vocational high schools, the number of industrial applications in vocational high school programs, etc.) with workshops where the stakeholders of the industry take part for the training contents/quality and the quality ofthe graduates

• Increasing the competencies of the electric, hybrid vehicle, technology and design development programs that have been established or are in the process of being established in the eyes of both instructors and students and supporting the promotion of the programs

Micro Investment (<100 Mil-lion TL)

1-3 Years(Medium

Term)

Aksiyon 1.1.21 Designing and Implementing Professional

Development Programs

• Enriching training and mentoring activi-ties in order to prepare especially for the new generation trends in the automo-tive industry in order to adapt qualified white-collar personnel to the international competition process and bring them to the industry.(For example, training in areas such as new generation purchasing, sales-marketing techniques; data manage-ment; in-house hacklathon/entrepreneur-ship competitions; digital transformation applications, etc.)

• Designing cloud platforms for institution-al capacity development and personnel competence development and promoting online applied training programs for the development of the industry


1-3 Years(Medium

Term)

1-It is the action plan in which the strategy to be designed on a national scale can be customized in line with the dynamics of the region.


43


BudgetApplication

Term

Stra

teg

y 1

Skill

and

Cap

acit

y B

uild

ing

Strategy 1.1Develop-ment of Training

and Con-sultancy

Programs

Action 1.1.31 Designing and Implementing Consultancy

Programs Re-lated to Digital

and Flexible Transformation

Systems

• Designing consultancy and training pro-grams in the fields and sharing application examples in cooperation with model/pilot factories in the region and digital transfor-mation, flexible transformation, sustain-able lean manufacturing in areas such as green SME, especially for SME-scale companies, to maintain flexible and adap-tive supply chain management, which is one of the important implications of the COVID-19 crisis


1-3 Years(Medium

Term)

Action 1.1.42 Designing and Implementing Mentoring and Development

Programs for the Em-ployment of

Disadvantaged Groups

• Supporting women-oriented human re-sources planning aimed at tackling gender inequality across the industry

• Increasing practical internship programs and promoting industrial advantages, es-pecially in vocational high school and high school periods, in order to attract female employees to the automotive industry at an early age.Designing and promoting special programs for the employment of disadvantaged groups (especially disabled, young groups) in SME-scale companies throughout the industry.


1-3 Years(Medium

Term)

Strategy 1.2Increasing Industrial

Design and Branding

Action 1.2.1Supporting De-signs for Import

Substitution

• Performing localization studies of metal and plastic fasteners imported from Far Eastern countries in the TR42 Region, where quality problems are encountered a lot.

• Bringing the components (especially software and electronic parts) to be im-ported from abroad for the TOGG vehicle to the country's economy as a result of R&D activities by using the region's wide production network.

• Conducting local supplier assessment and development programs in order to accel-erate the process of involving domestic suppliers of the TOGG tool and to manage them in a healthy way.

Mezo Investment

(> 100 Million & <1 Billion TL)

1-3 Years(Medium

Term)

Action 1.2.2Supporting

Branding Activi-ties of Domestic

and National Products

• Supporting works such as participation in fairs, B2B meetings, related products for the promotion of the intellectual property rights of the sub-industry companies that carry out production activities for both TOGG and conventional vehicles in their own R&D centers and/or in cooperation with the university-industry launch events with the participation of key companies from the market

Mezo Investment


1-3 Years(Medium

Term)

1-It is the action plan that can be applied for the region in line with global trends.2- It is the action plan in which the strategy to be designed on a national scale can be customized in line with the dynamics of the region.

44


BudgetApplication

Term

Stra

teg

y 1

Skill

and

Cap

acit

y B

uild

ing

Strategy 1.2Increasing Industrial

Design and Branding

Action 1.2.3 Supporting Consultancy and Training Programs on

Intellectual and Industrial Prop-

erty Rights

• Identifying and making an inventory of products that can be produced through-out the region, add value to the industry and import substitutes, and develop the patenting and branding processes of these products

• Conducting institutional capacity building programs for R&D studies of SMEs with Chambers of Commerce and Industry and Cluster Organization


1-3 Years(Medium

Term)

Strategy 1.3Creat-ing and

Developing Industrial Clusters

Action 1.3.11

Increasing Clustering Sup-port Program Applications for Increasing the Number of Clusters in the Sub-Industry

Area

• Establishing sub-clusters and supporting their activities, especially in sub-industry production areas where the TR42 Region is strong, with the aim of developing the clustering approach, expanding R&D, innovation and industrial design applica-tions in the automotive industry (for ex-ample, textile materials, safety equipment, glass, automotive plastic parts)


1-3 Years(Medium

Term)

Action 1.3.2Establishing

Support Mech-anisms for Cur-rent Clusters' Competence and Capacity Development

• Enriching cluster activities by taking into account the automotive industry compa-nies and IT/Electronic companies cooper-ation initiatives

• • In the process of localizing TOGG, supporting partnerships such as clusters/joint ventures for the purpose of both developing a culture of joint cooperation between suppliers and developing com-mon know-how.


1-3 Years(Medium

Term)

Action 1.3.3 Supporting

SEIC Activities Specific to

Sub-Industry Activities

• Sharing successful partnership examples and models, raising awareness about part-nership culture


1-3 Years(Medium

Term)

Action 1.3.4Creating En-trepreneurial

Ecosystem and Ensuring Their

Integration with Industry

• Adding innovation and research methods to existing high school and higher educa-tion curricula in the region

• Increasing the implementation of financial support programs that will increase the access of entrepreneurs to information, financial resources and entrepreneurship networks

• Increasing the basic business establish-ment and management skills of potential entrepreneurs in the region through train-ing/certificate programs

• Developing the necessary infrastructure for the development of innovation-orient-ed entrepreneurship


1-3 Years(Medium

Term)

1- It is the action plan that can be applied for the region in line with global trends.


45


BudgetApplication

Term

Stra

teg

y 2

Sup

por

ting

R&

D In

fras

truc

ture

Strategy 2.1Dissemi-nation of

Testing and Excellence

Centers

Action 2.1.11 TYPE Approval, Quality Control,

Certification etc. Establishing and Expanding Facilities Where Processes Can Be Integrated

• Implementation of integrated facilities that will allow the performance/life/per-formance tests (hydraulic, mechanical, electronic, climatic, etc.) of motor vehicles and their parts and components to be car-ried out and certified in accordance with international regulations and standards.

• Carrying out the necessary promotional and advertising activities for the use of the integrated facility to be established by companies operating abroad


1-3 Yıl (Orta Vade)

Strategy 2.2Devel-

opment of New

Generation Technolo-

gies

Action 2.2.12 Development of Light and Dura-ble (nano-level)

Materials

• Developing strategic products by defining the necessary R&D supports to support localization in efforts to increase it and to produce the relevant products in the region. For example;

• In the field of raw materials, where the added value will be the highest

• New generation sheets, engineering plastic; Fuel savings and reduction of accident and damage rates with light but robust materials (carbon fiber, enhanced aluminum, etc.)

• Development of reinforced steel, ceramic products, aluminum alloys for conventional tools

Mezo Investment


1-3 Years(Medium

Term)

Action 2.2.2* For New Gen-

eration Vehicles (autonomous,

connected, electric, etc.)

Supporting Do-mestic Technol-

ogy Studies

• Creating prototypes of new generation technologies and products in the fields of electricity, electronics, mechatronics, software, and supporting their commer-cialization potential

• Electrical domestic brand vehicle (TOGG) sensor, electronic parts, transmission organs and so on. producing prototypes of high value added products

• Supporting R&D activities for key tech-nologies such as battery technologies, new generation gearbox, and providing necessary collaborations

• Development of holistic technologies that can simultaneously integrate the intelli-gent transportation systems infrastructure of new autonomous and connected vehi-cle technologies and driver behaviors

• Supporting research and test applications for new generation fuel technologies (such as hydrogen fuel cells)

• Researching alternative environmentally friendly ways of using new technologies, materials and software developed and designed for the automotive industry and supporting their use in the creation of smart cities

• 5G and V2X technologies; remote sensing (sensor like radar/lidar) systems; Support-ing research studies such as optimization of 5G network structures

Mezo Investment

(> 100 Million & <1 Billion TL

1-3 Years(Medium

Term)

1- It is the action plan in which the strategy to be designed on a national scale can be customized in line with the dynamics of the region. 2It is the action plan that can be applied for the region in line with global trends.

46


BudgetApplication

Term

Stra

teg

y 2

Sup

por

ting

R&

D In

fras

truc

ture

Strategy 2.3

Develop-ment of

University & Industry

Collabora-tions

Action 2.3.1Supporting R&D Projects Using

Overseas Funds

• Making high value-added products that will be developed by using funding op-portunities such as Horizon Europe, IPA, World Bank etc., and also ensuring that the pilot applications of high value added products in the regional ecosystem are carried out


1-3 Years(Medium

Term)

Action 2.3.21 Supporting Research

Infrastructure in Universities/High Schools

and Vocational High Schools

• Developing and supporting the labora-tory infrastructures of universities and vocational high schools that train qualified personnel for the automotive industry, where they can conduct practice-oriented research, within the framework of pub-lic-university-industry cooperation.


3-10 Years(Long Term)

Stra

teg

y 3

Phy

sica

l Inf

rast

ruct

ure

Dev

elop

men

t

Strategy 3.1Integration

of High Technology

Systems

Action 3.1.1*Supporting the Integration of Industrial Ro-botic Systems in Production

Systems

• Supporting the use of flexible and chang-ing production lines by using Industry 4.0 applications and fully autonomous robotic systems, creating a technology pool of production systems that can be an example in this regard, and supporting simulation studies that can reflect their gains to the industry in a concrete way

Mezo Investment



Action 3.1.2*Encouraging

Green-Themed Software That Provides Flex-ibility and Risk Management in Supply Chains

• Encouraging the integration of ERP and CRM modules to be developed using new generation solution algorithms, and sup-porting their potential gains with simula-tion studies.

Mezo Investment



Strateji 3.2Improving

Operational Infrastruc-

ture

Aksiyon 3.2.1*Designing and Implementing New Genera-

tion Integrated Production Campuses

• In the TR42 Region, the automotive indus-try and supporting industries (electronics, informatics, etc.) are predominantly inte-grated with manufacturing companies, as well as other components of the cluster, educational institutions, service providers, entrepreneurs, R&D centers, which offer advanced technological and logistics infrastructure services. design and imple-mentation of areas (campuses)

• (For example, Bursa Teknoloji OIZ (TE-KNOSAB) located in the TR42 Region is being built as a good example of such an integrated campus. Providing financial and organizational support to support and enrich the investment related to both BEBKA Financial Support Programs and the resources of the Ministry)

Mezo Investment





47


BudgetApplication

Term

Stra

teg

y 3

Phy

sica

l Inf

rast

ruct

ure

Dev

elop

men

t

Strateji 3.2Improving

Operational Infrastruc-

ture

Action 3.2.21 Increasing

Auto-Port Qual-ified Ports and Enriching Com-bined Transport

Activities

• Providing an advanced and integrated transportation network that will enable combined transportation by developing the port infrastructures (both digital and operational capacity) in Gemlik Region, completing the railway integration

• Manufacturing companies carry out their activities in their foreign trade activities by using direct railway-seaway options inde-pendently of road transport by enriching the railway connection lines throughout the region

Makro Yatırım (>1 Milyar TL)


Strateji 3.3Develop-

ment of In-frastructure

for New Generation

Markets

Action 3.3.1* Development of Charging

Station Network for Alternative Fuel Vehicles

• Disseminating network design and ca-pacity management models to the whole region by starting from the pilot districts by supporting the physical infrastructure (charging stations, electricity generation, grid, etc.) with advanced forecast models in order for electric vehicles to become widespread

• Feasibility studies of lithium battery production facilities, hydrogen fuel cell and recycling facilities are carried out and included among investment priority facilities

Macro Investment (> 1 Billion

TL)

3-10 Yıl (Uzun Vade)

Aksiyon 3.3.2*

Integration of ITS Systems

• Designing smart city concepts in the process of widespread use of autonomous and connected vehicles, and designing and developing cloud-based data man-agement systems where integrated data management can be provided by munici-palities or participating institutions

• Establishing multidisciplinary research teams that will actively use big data analysis methods and build and manage real-time planning and management mechanisms, and start pilot studies for the near future


TL)


Stra

teg

y 4

Leg

al a

nd A

dm

inis

trat

ive

Reg

ulat

ions

Strategy 4.1Compli-

ance with Foreign

Regulations

Aksiyon 4.1.1*

Accelerating Compliance

with EU Climate Change and

Environmental Legislation

• Considering that the region's automotive exports are in the range of 75% to 80% towards EU countries, it is important to take steps in the automotive industry in line with the EU's targets. Considering the Green Consensus and Paris Climate Agreements, additional actions to be tak-en for export companies/process chang-es/tax burdens result in additional costs and risks such as loss of market share for companies experiencing adaptation diffi-culties. For this reason, establishing special teams against the legislative changes that will significantly affect the dynamics of the industry in the near future, sharing the transformation process with the industrial-ists and creating checklists for the things to be done to ensure the general adaptation of the industry.


1-3 Years(Medium

Term)

1- Ulusal ölçekte tasarlanılacak stratejinin bölge dinamikleri doğrultusunda özelleşebileceği eylem planıdır.

48


BudgetApplication

Term

Stra

teg

y 4

Leg

al a

nd A

dm

inis

trat

ive

Reg

ulat

ions

Strategy 4.1Compli-

ance with Foreign

Regulations

Action 4.1.21 Type Approval, Regulation of

Test and Inspec-tion Certifica-

tions

• Design and implementation of systems that will allow the type approval, testing and certification processes of vehicles to be carried out from a single center

• Supporting local accredited institutions to stop foreign dependency in testing and certification processes


1-3 Years(Medium

Term)

Action 4.1.3*

Regulation of Recycling and Scrap Vehicles

• Carrying out a detailed feasibility study for the recycling process by determining the number of vehicles that are scrapped in the market due to the very old age of the vehicle parks in Turkey and the re-gion's ecosystem in comparison to the EU standards and particularly due to safety and environmental issues

• In the EU harmonization process, within the scope of sustainable environmental protection strategies of the industry, it is foreseen that plastic and metal products used in the production of vehicles contain recycled materials in certain proportions. In this context, designing financial support programs and designing potential recy-cling strategies specific to the region by bringing industry companies together in order to carry out relevant R&D studies.


1-3 Years(Medium

Term)

Strateji 4.2Revision of Domestic

Regulations

Action 4.2.1*

Regulation of Tax and

Foreign Trade Regulations for Vehicles

Using Environ-ment-Friendly

Fuel Technology

• Under the EU climate management legislative amendment obligations, the reduction of SCT and Customs Duties for electric/hybrid vehicles that use new generation fuels with low carbon emis-sion emissions, in a more advantageous format.


1-3 Years(Medium

Term)

Action4.2.2Regulation of Technology, Innovation and Human

Resources Reg-ulations

• Revising the legislation on incentive mechanisms for technological invest-ments to improve regional competition for University - Industry collaborations, especially in the production processes of high value-added product groups for import substitution and/or electronic and software development processes for new generation vehicles (especially for TOGG subcomponents); R&D activities; tax bur-dens on new employment; and develop-ing new regulations


1-3 Years(Medium

Term)

Action 4.2.3Arrangement of Regulations for the Protection of Intellectual

Property Rights

• Developing a support mechanism where-by the number of patents, utility models, designs and registrations will be increased rapidly by implementing the Regulations on the Protection of Intellectual Property Rights at a significant level.


1-3 Years(Medium

Term)

Action 4.2.4Supporting Quality and

Standardization Studies

• Cooperating with institutions such as TSE, TURKAK, and supporting the standardiza-tion of products and services and the pro-cesses of obtaining international quality certificates and ensuring that they comply with the new EU regulations.





49


BudgetApplication

Term

Stra

teg

y 5

Est

ablis

hing

Fin

anci

al S

upp

ort

Mec

hani

sms

Strategy 5.1Supporting

Foreign Trade Ac-

tivities

Action 5.1.11 Improving the

Opportunities of Sub-Industry to Foreign Markets

and Support-ing Fairs and Export Activi-ties for Alter-

native Markets (African and

Middle Eastern countries

• Developing technical trips, fairs, B2B meeting platforms for new markets which have not reached sufficient maturity although a significant part of the current export activities continues increasingly towards the EU and American countries in order to prevent the production and turnover loss in the relevant crisis envi-ronments by creating alternative market opportunities for the manufacturers in the region as a result of any political crisis that may arise with the relevant countries and providing information and guidance for the companies (especially SMEs) to use the incentive mechanisms offered within the Ministries



Action 5.1.2Increasing Ex-port Support

• Improving this process, which creates a significant financial burden on the finan-cial systems of manufacturing compa-nies, by providing improvements in VAT receivables that are blocked in the system against export credits provided through Eximbank.

• Evaluating the activity of export sales volumes realized in centers based over-seas of the Turkey-originated producer companies and making them benefit from Eximbank loans

• Revising the customs tax rates on the product groups that will create added value for the country and supporting the nationalization processes of the relevant products

• •Encouraging applications to Global Supply Chain (KTZ) Competency Projects carried out by the Ministry of Trade to support exports and ensuring that the relevant support mechanisms are used.

Mezo Investment

(> 100 Million & <1 Billion TL


Strateji 5.2Supporting Industrial Develop-

ment

Action 5.2.1Encouraging

the Use of Do-mestic Electric

Vehicles

• Organizing support campaigns, compe-titions and special promotional activities for the advantages of electric vehicles in order to use domestic electric vehicles (TOGG) by the society and to create an economy of scale in the process of transformation of the industry into new generation vehicles



1- Ulusal ölçekte tasarlanılacak stratejinin bölge dinamikleri doğrultusunda özelleşebileceği eylem planıdır.

50


BudgetApplication

Term

Stra

teg

y 5

Est

ablis

hing

Fin

anci

al S

upp

ort

Mec

hani

sms

Strategy 5.2

Supporting Industrial Develop-

ment

Action 5.2.2 Creating Re-

gional Incentive Packages

• Developing simulation-based dynamic analysis mechanisms in order to attract new investments, especially in Eastern European countries, to the regional eco-system by preparing a special promotion and marketing strategy in order to attract new generation vehicle investments to our country.

• Identifying partnerships and/or M&As to be formed by different stakeholders from the electronics, software and automotive industries in order to create an economy of scale and to support the processes of creating national brands and completing their financial analysis


3-5 Years (Long Term)

Action 5.2.3Provision of

Support Loans

• Shaping financial support (incentive packages for energy, labor input costs) for key areas where technology development is provided and value-added production is made for the automotive industry, which will minimize the effects of the COVID-19 pandemic and increase the competitive-ness of the region.

• Developing financial support mechanisms for increasing logistics cost burdens that negatively affect especially a large part of the companies in the region.


TL)

1-3 Years(Medium

Term)

Action 5.2.41 Designing and Implementing Entrepreneur Support Pro-

grams

• Encouraging new entrepreneurs in close relations with technology transfer offices, technology development zones and universities for the development of innovative ideas, projects, processes and products, designing new generation automotive-themed entrepreneur support mechanisms

• Enriching financial resources for the com-mercialization of products or services with high added value through tools such

Mezo Investment


1-3 Years(Medium

Term)

1- It is the action plan in which the strategy to be designed on a national scale can be customized in line with the dynamics of the region


51


BudgetApplication

Term

Stra

teg

y 5

Est

ablis

hing

Fin

anci

al S

upp

ort

Mec

hani

sms

Strategy 5.3

Improving Industrial Efficiency

Action 5.3.11 Credit Packag-es to Support

Digital Transfor-mation

• Preparing projects for industry-specific product groups defined under the Tech-nology Oriented Industry Action program and supporting the industry for transfor-mation

Mezo Investment


1-3 Years(Medium

Term)

Action 5.3.2Establishing R&D Support

Programs for Imported

Substitution and Development of New Generation Technological

Products

• It is important for our existing manu-facturers to turn to alternative energy vehicles and to attract new alternative energy vehicle investments that will make a difference in the new automotive eco system in our country. Designing R&D grant programs to develop embedded sensor technologies (IR, radar, lidar etc.); adaptive software that provides big data management; Sensor technologies pro-viding V2V or V2I type data sharing; New generation materials with nano technolo-gy support (aluminum sheets, carbon fi-ber, etc.); encouraging industry-university cooperation; providing access to research funds/centers abroad and ensuring that they are attracted to the region

Mezo Investment


1-3 Years(Medium

Term)

1-It is the action plan that can be applied for the region in line with global trends.

52

9. Policy RecommendationsConsidering the strategies and action plans defined for the automotive industry operating in the TR33 Region, the following policy recommendations are recommended to be evaluated and implemented.

Human Resources and Capacity Development

Policy Recommendation Application Term

Designing vocational training programs for human resources and capacity development in line with practice-oriented and industrial expectations

Short Term(0-1 Year)

Completing educational activities through real applications in the industrial environment in line with the input structure/needs of the industry by making an investment partnership with the automotive industry in the process of improving the capacity and infrastructure opportunities of students studying in vocational high schools located in the Organized Industrial Zones.


Considering the changes that will arise as a result of global trends, new technology needs, modernized and related process design needs between the institutions that produce educational services and the institutions that demand this service, modernizing the infrastructures and ensuring the adaptation of the applications.

Medium Term(1-3 Years)

Designing a transition process for the continuity of production during COVID-19 pandemic, the number of unemployment that may arise in the industry as a result of the cost pressures after the dismissal bans ended, and perhaps below the previous levels with technological modernization investments. In this context, designing a transition period by considering the socio-economic balances by determining the number of unemployment that will arise throughout the industry.


Making legal arrangements to determine standards and criteria for new generation management styles such as prolonged work, use of online management alternatives which come to the fore with the COVID-19 outbreak


Following and supporting regular development profiles with talent matching programs, potential personnel who may be at the management level in the transformation process of the automotive industry are included in the system in high school


encouraging mentoring and support mechanisms to increase the number of women employees to above the average of Turkey in order to establish gender equality in the industry


Finance


Continuation or expansion of financial support packages that protect employees such as unemployment insurance, short-time work allowance


Supporting the industry with incentive packages for the options to create new investments and employment by eliminating the risks in front of both domestic and foreign market volumes by ensuring the stability on macroeconomic indicators and evaluating the burden of the tax system (for example, high special consumption taxes) and high interest rates on financial resources


Supporting the consultancy and support mechanisms that will enable the industry companies (SMEs) to access funds from abroad such as development programs that support their competitiveness, and to bring them to the regional ecosystem by supporting them with tools such as angel investment, regional venture capital fund, supporting


Continuing the additional measures taken to reduce the spread rate of the virus as a result of the COVID-19 pandemic in the post-pandemic period and supporting the additional cost burden of these measures with incentives


Conducting promotional activities for new investments in cooperation with TR Presidency Investment Office and ZAFER Investment Support Offices, multinational companies and upper umbrella organizations operating in the automotive industry in the TR33 Region


Supporting research activities for alternative markets (South America, Africa, the Middle East, etc.) that are still immature and with high service expectations in order to prevent the fragility of the industry in case of any political crisis as an alternative to the EU market, which is the main market throughout the industry, and to create incentive mechanisms



53

Infrastructure


Organizing TYPE approval, certification and testing processes on a single system, reducing the bureaucratic burden on the system and accelerating the processes


Making an optimal network structure and resource planning by analyzing the new infrastructure requirements (electricity generation capacities, charging station distribution, locations, parking spaces, etc.) that will be needed for new generation vehicles (electric, hybrid).


Planning and establishing new combined transport network structures that will increase the competition level of the region (taking time, cost, environmental objectives into consideration) by analyzing the transportation networks used in foreign trade activities


Developing prototypes of new generation product groups that will emerge as a result of the global trends of the industry (based on the GEAR 2030 analysis published by the EU [GEAR, 2017]) and the manufacturing companies and supporting industries in the region (software, electronics, materials, etc.)


Supporting the export of the relevant products to the foreign market by designing and developing domestic and national technological components specific to the TOGG vehicle in the immature market by organizing special R&D programs especially for new generation vehicles


Supporting the commercialization processes of the relevant start-up companies under the leadership of technology transfer offices and technology development zones by designing innovation and entrepreneurship programs for the technological/organizational transformations that the industry envisages in the medium/long term as a result of global trends (for example, VR/AR technologies foreseen to be used in sales and marketing channels; big data management to be used in supply chain systems, machine learning; data security, etc.)


Creating information and support mechanisms through the relevant industry stakeholders by analyzing the industry's additional regulation changes that will come in parallel with the EU green consensus and Paris agreement (for example, carbon footprint tracking, carbon emission reduction, green certificate requirements, etc.) and potential cost items.


Continuing training activities by establishing training centers for the development of the industry related to new generation sales and marketing techniques, digital transformation in production systems and design-oriented thinking methods.


Supporting the transformation processes of companies with financial support mechanisms by supporting mentoring and consultancy activities during the digital transformation of the industries and transition to industry 4.0 systems


Reducing the age of vehicle parking and making analyzes against the new environmental, safety and climate related regulations put into effect by the EU, and making incentive packages and regulation changes in line with the needs

Long Term(3-10 Years)

54

10. TR33 Region Automotive Industry Analysis Summary

SUMMARY OF THE AUTOMOTIVE INDUSTRY ANALYSIS OF TR33 REGIONTHE MOST IMPORTANT STRENGTHS OF TR33 REGION

• Having a large number of international large and medium-sized automotive sub-industry companies (especially in the fields of rim, electronic products (cable systems), accumulator and metal molding) and having a wide range of products (industrial knowledge and experience + intensive foreign trade activities)

• Wide opportunities for university-industry cooperation + 6 Automotive R&D Centers• The presence of an automotive supply industry cluster and innovation center operating in the growth

of Manisa OIZ• Having an active / integrated working environment with local governments and umbrella organizations

(TAYSAD, OSD)• It is logistically close to İzmir ports and is located in the middle of İzmir-Ankara-İstanbul in Kütahya and

in a location very close to Bursa, Kocaeli and Sakarya where the main industry is located.• Having strong, innovative and domestic production opportunities in the supply of products or product

groups (especially accumulator, rim, machinery and sheet metal molding industries) belonging to main and large-scale sub-industry companies

• Designing and delivering application-oriented vocational training programs based on new generation tools to meet the expectations of the automotive industry within the Vocational and Technical Training Center (UEMTEM) supported by Elginkan Foundation.

MAIN STRATEGIES FOR ENHANCING INTERNATIONAL COMPETITIVENESS FOR TR33 REGION

• Designing and applying vocational training programs (e.g. electric vehicle programs) for new generation vehicles

• Supporting integration of industrial robotic systems for SME-scale labor-intensive production companies• Enriching the infrastructure connection suitable for combined transportation activities to ports in Gemlik

and İzmir regions • Developing and supporting infrastructure for alternative fuel vehicles (e.g. charging station network)• Accelerating Compliance with EU Climate Change and Environmental Legislation• Development of Light and Durable (nano-level) Materials• Supporting domestic technology studies for new generation vehicles (autonomous, connected, electric,

etc.)• Encouraging the development and use of green-themed software that provides flexibility and risk

management in supply chains in the face of high-impact risks such as regulation changes and the COVID pandemic

• Establishing R&D Support Programs for Imported Substitution and Development of New Generation Technological Products

• Improving the access opportunities of the supplier industry (especially SMEs) to foreign markets and supporting fairs and export activities for alternative markets (African and Middle Eastern countries)

• Ensuring competence and capacity development synchronously with the innovation center in the region by granting the official status of MANİSA OIZ Sub-Industry Cluster, which operates in the automotive sector

RECOMMENDED ACTIONS FOR REGION TR33


55

• Taking an inventory for the domestic production of potential components that will be needed for the electric vehicle transformation of the TR33 Region and for the new generation vehicles (electric, hybrid) and supporting it within the scope of the Technology Focused Industry Action program of the Ministry of Industry and Technology with the start of production of TOGG vehicle in Gemlik Region


• Supporting digital transformation and transformation to design-oriented production systems in order to adapt SME-level companies that have just started foreign trade to the change process by listing the changes in the regulations that occurred/will occur in the US and EU regions in the fields of environment, climate, security, etc.

• Using some of the existing production infrastructures by exporting to conventional vehicle markets in countries such as Africa and the Middle East, which are predicted to be unable to complete the transformation of electric vehicles simultaneously with developed countries in the near future.

• Developing and implementing professional development systems and programs for application-oriented and new generation vehicles, taking into account new technological requirements in line with the needs of the industry

• Developing the green OIZ concept and spreading industrial symbiosis practices in order to meet the EU environment, climate legislative changes and consumer expectations (low energy use, carbon emission, etc.) under the leadership of Manisa OIZ management

• Designing cloud platforms for institutional capacity development and personnel competence development and promoting online applied training programs for the development of the industry

• Organizing training and consultancy activities in the fields such as digital transformation, flexible transformation, sustainable lean manufacturing, green SME in cooperation with pilot/model factories in the region

• Designing and promoting special programs for the employment of disadvantaged groups (especially disabled, youth and women groups) in SME-scale companies throughout the industry.

• Supporting the use of flexible and changing production lines by using Industry 4.0 applications and fully autonomous robotic systems, creating a technology pool of production systems that can be an example in this regard, and supporting simulation studies that can reflect their gains to the industry in a concrete way.

• Designing inter-industrial transformation programs and supporting entrepreneurship in thematic areas in order to evaluate the know-how gained in the automotive industry in other industries (electronics, IT, metal) or application areas related to the automotive industry

• Carrying out feasibility studies to reduce the age of vehicle parking and evaluate the recyclable materials that can be used in the production of vehicles, taking into account the new environmental, safety and climate-related regulations put into effect by the EU.

• Development of joint UR-GE projects in the fields of metal (rim), electronics (cable systems), accumulators and metal molding

• Enriching the railway connection lines with İzmir Port, Çandarlı Port, Gemlik Ports and enabling the manufacturing companies located in Manisa and Kütahya provinces to carry out their activities with low costs by using direct rail-maritime options independent of road transportation in their foreign trade activities

• Designing smart city concepts in the process of widespread use of autonomous and connected vehicles, and designing and developing cloud-based data management systems where integrated data management can be provided by municipalities or participating institutions

56

11. Conclusion and EvaluationJThe studies carried out are discussed under three main headings as follows within the scope of this report which was prepared specifically for TR33 Region for the automotive industry, one of the 5 fragile industries defined within the scope of the "Response and Resilience to the COVID-19 Crisis Project", financed by the Japanese Government and carried out in cooperation with the United Nations Development Program (UNDP) and the Ministry of Industry and Technology:

A. Assessment of the Industry During the COVID-19 OutbreakThe following findings were reached and observed in the light of the data obtained as a result of the survey study and focus group meeting, which was organized to obtain a rich perspective and a broad participant perspective on critical issues specific to the industry:

• Although the companies operating throughout the region experienced partial production losses due to the COVID-19 pandemic, there were no significant sales/turnover losses based on TRY since they mainly carried out export activities.

• Due to the COVID-19 outbreak, the companies have taken labor and workplace precautions at high level.

• Due to the COVID-19 outbreak, serious supply difficulties were experienced, especially due to the capacity reduction of Far Eastern raw material/intermediate product suppliers and the decision to stop production.

• Due to the deterioration in the supply-demand balance, the raw material input costs have increased significantly and in this case, it significantly affects the financial sustainability of the companies.

• Due to reasons such as labor-intensive production companies, especially in the production systems, key personnel losses, long quarantine periods, there are significant problems in the sustainability of production, but these problems are ineffective in companies that use automation technologies intensively in their production lines.

• Due to the fact that the companies mainly benefit from the financial support programs provided by the state (breathing loan, partial work allowance, loan structuring, etc.) but these supports are not sufficient to cover the losses in the industry.

• Due to the fact that the companies tolerate liquidity deficiencies on their own, and this situation increases the financing costs of companies.

• Due to the fact that the companies throughout the industry have turned to investments to increase production efficiency instead of investing in areas related to environment, energy and green systems.

B. Positioning the Region Against Industrial Trends It has been observed that the companies in the region follow the trends of the region closely due to reasons such as sub-industry companies in the region, intensive export activities to developed countries such as the EU and America, the high density of medium/large-scale companies that have completed their institutional transformation. Considering the industrial composition and logistics infrastructure advantages of the region, it is highly probable that the new products that will emerge in line with the global trends will be the production base and the application area of the systems. In this context, the predicted changes in the region in line with global trends have been observed as follows:

• The fact that TOGG initiative will create a know-how for the electric vehicle segment at the regional level and will play an important role in the development, preparation for the transformation process and integration processes of the sub-industry companies in the face of this trend of change.

• Designing capacity building and institutional transformation programs that will emerge in line with global trends through the industrial cluster and innovation center located throughout the region and strong research centers based in İzmir for areas such as digital


57

transformation, automation, electrification• Providing import substitution for new generation vehicles by establishing close cooperation

with industries that support the automotive industry (electronics, metal, etc.) throughout the region.

• Radically changing the industry's value chain against the policy changes (such as the "Carbon-Neutral" policies of the European Union) occurring in the European market, which constitutes a significant part of the export share of the whole industry, especially the main industrial companies; starting environmentally sensitive technology-oriented studies urgently and encouraging feasibility studies for related areas (environment, climate, energy, security, data management, etc.)

C. Suggested Action Plans and Policies for the Development of the Region's Competition LevelThe recommended action plans and policy recommendations for the development of the automotive industry, which has a significant impact on the socioeconomic development of the region, and for the region to become a production base on a global scale, as a result of both the survey study and focus group meeting conducted and the detailed research of secondary data sources, are summarized as follows:

• It has been observed that the main problem in front of the automotive industry in the region is the lack of qualified personnel (language skills, lack of industrial experience, etc.). Developing and implementing professional development systems and programs for application-oriented and new generation vehicles, taking into account new technological requirements in line with the needs of the industry

• Designing cloud platforms for institutional capacity development and staff competence development and promoting online applied training programs for industry development

• Supporting logistics infrastructure systems and combined transportation activities in order to increase the competitiveness of the manufacturers in the region

(For example, special line applications to be made in production-intensive areas in the region will significantly reduce the transportation costs and times of manufacturers in both import and export activities by developing railway lines that will connect ports in Izmir and Gemlik regions. In addition, supporting the operational and technological transformations of the MOS Logistics Center in the region in line with this strategy)

• It is predicted that the region will take a leading position in the electric vehicle transformation with the start TOGG production in Gemlik Region. Identifying the products that can be produced throughout the region, provide added value to the industry and can be imported substitutes and turn them into an inventories in this direction; improving the patenting and branding processes of these products; and making an optimal network structure and resource planning by analyzing new infrastructure requirements (electricity generation capacities, charging station distribution, locations, parking spaces, etc.)


• Supporting the transformation of digital transformation and design-oriented production systems with financial support programs and mentoring activities in order to adapt the manufacturing companies in the region to the change process as a result of the maturation of the electric vehicle market and the termination of diesel vehicle production in the near future within the scope of compliance with EU regulations

• Using some of the existing production infrastructures by exporting to conventional vehicle markets in countries such as Africa and the Middle East, which are predicted to be unable to complete the transformation of electric vehicles simultaneously with developed countries in the near future

• Design and implementation of integrated areas (campuses) with advanced technological and logistics infrastructure services that will include the automotive industry and supporting

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industries (electronics, informatics, etc.), manufacturing companies, educational institutions, service providers, entrepreneurs and R&D centers serving the industry within the the OIZs to be established.

• Development and dissemination of the Green OIZ concept in order to meet the EU environment, climate legislative changes and consumer expectations under the leadership of Manisa OIZ management

It has been observed that the current transformation strategies of the majority of the medium/large scale sub-industry companies operating under the automotive industry throughout the region are similar to or overlap with the global action plans defined by the United Nations' sustainable growth and development goal. The industry stands out as one of the leading industries in Turkey, especially with its practices in the fields of environment, climate and energy management. It has a structure that can establish adaptive and flexible structures and prevent cost increases based on the high-impact risks such as the COVID-19 pandemic, thanks to the efficiency and crisis management mechanisms it has put forward in each part of the value chain. In addition, it has been observed that it is above the average of Turkey particularly in the number of female white-collar workers in terms of gender equality in the industry.

This report is expected to be a guide specific to TR33 Region and to contribute positively to decision-making processes at both macro level (Ministries) and micro level (manufacturers, educational institutions, etc.


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Annexes Annex 1. TR33 Region Focus Group Meeting Participant List• Manisa TSO - Filiz Kavaklı (Secretary General),

• Manisa TSO - Tirsan Kardan Ticaret ve Sanayi A.Ş. - Tolga Özer (CEO)

• Endosa Kalıp İthalat İhracat San ve Tic. A.Ş - Osman Kivircik (Chairman of the Board)

• Maxion Jantaş Jant Sanayi ve Ticaret A.Ş. - Birgül Etiz (R&D Officer)

• Konveyör Beyaz Eşya ve Otomotiv Yan Sanayi Ticaret A.Ş. - Selim Helvacı (Factory Manager)

• Manisa OIZ - Asya Padovan (OIZ Project Development Officer)

• Manisa OIZ Innovation Center - Devrim Şavlı (Center Director)

• Muradiye OIZ - Özgür Adem Arıç (OIZ Manager)

• Zafer Development Agency - Veli Oğuz (Secretary General)

• Zafer Development Agency - Cansu Uyar (Manisa YDO Coordinator)

• Zafer Development Agency - Mustafa Coşkun (Manisa YDO Specialist)

• Kazcıoğlu Endüstri - Serhat Yaldız (Production Manager)

• Kros Otomotiv - Halid Taş (Occupational Health and Safety Unit Supervisor), Mustafa Keskin (Business Development Specialist)

• Nursan - Göksel Onuş (Deputy General Manager)

• Üstünberk Holding - Zeyit Damar (Factories Coordinator)

• Kütahya Chamber of Commerce and Industry - Salih Nafi Alıç (Secretary General), Ahmet Orhan Güngör (Expert)

• Zafer Development Agency – Kutlu Eser (Kütahya YDO Coordinator)

• Zafer Development Agency – Elif Zeytin (Kütahya YDO Specialist)

Annex-2. TR33 Region Automotive Industry R&D Centers List

Sıra No AR-GE MERKEZİNİN ADI İL SEKTÖR BELGE TARİHİ

1 Olgun Çelik Sanayi Ve Ticaret A.ş. Manisa Otomotiv Yan Sanayi 18/06/2010

2 Nursan Kablo Donanımları A. Ş. (Tavşanlı Şubesi) Kütahya Otomotiv Yan Sanayi 11/12/2012

3 İnci Gs Yuasa Akü San. Ve Tic. A.ş. Manisa Otomotiv Yan Sanayi 04/01/2016

4 Tirsan Kardan Sanayi Ve Ticaret A. Ş. Manisa Otomotiv Yan Sanayi 25/04/2016

5 Standard Profil Ege Otomotiv San. Ve Tic. A.ş. Manisa Otomotiv Yan Sanayi 02/12/2016

6 Nursan Kablo Donanımları A. Ş. (Kütahya Şubesi) Kütahya Otomotiv Yan Sanayi 22/05/2017


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Annex-3. List of Products Planned to be Supported under HAMLE Program

# GTİP Kodu GTİP Tanımı

1 840710009012 Spark ignition engine for other aircraft; cylinder volume> 250 cm3

2 840820510000 Diesel engine for other land vehicles; power = <50 kW

3 840820550000 Diesel engine for other land vehicles; 50 kW <100kW

4 840820570000 Diesel engine for other land vehicles; 100 kW <100kW

5 840820990000 Diesel engine for other land vehicles; power> 200 kW

6 841112301000 Turbojets for civil aircraft (44 kn <thrust = <132 kn)

7 841122201000 Tubopropellers for civil aircraft (1100 kW <driving power = <3730 kW)

8 841191001000 Turbojets and turbopropeller parts for civil aircraft

9 851140009000 Starters for other use

10 851150001000 Other generators for civil aircraft

11 851180009019 Other assemblies and devices for other use

12 851230100000 Burglar alarms of the type used in motor vehicles

13 851230900019 Other signaling devices with sound

14 851240000011 Electric motor wipers (single or double)

15 851290900011 Other components and parts belonging to lighting devices

16 851290900012 Other components and parts of vocal sign devices

17 851290900013 Other components and parts belonging to window wipers

18 860711000000 Pull-in plugs and Bissel plugs

19 860719100000 Axles for rolling stock or trams (mounted/unmounted); wheels and parts thereof

20 870220100000 Both diesel or semi-diesel and electric motor vehicles providing propulsion power; cylinder volume> 2500 cm3, capacity> = 10 persons

21 870220900000 Both diesel or semi-diesel and electric motor vehicles providing propulsion power; cylinder volume <= 2500 cm3, capacity> = 10 people

22 870230100000 Electric motor vehicles providing both gasoline and propulsion power; cylinder volume> 2800 cm3, capacity> = 10 persons

23 870230900000 Both gasoline and propulsive electric motor vehicles; cylinder volume <= 2800 cm3, capacity> = 10 persons

24 870240000000 Electric motor driven vehicles only; capacity> = 10 people

25 870332199011 Ambulance (diesel/semi diesel, new) (1500 cm3 <= "2500" cm3)

26 870340100000 Other vehicles with both gasoline and propulsion electric motor; new, EXCEPT those charged from external power supply

27 870350000000 Other vehicles with both diesel/semi-diesel and electric motors providing propulsion power; EXCEPT those charged from external power sources

28 870360100000 Other vehicles with both gasoline and propulsion electric motor; charged from a new, external power supply

29 870380100000 Other vehicles exclusively driven by electric motors; new

30 870390000000 Other vehicles for the transport of people

31 870821100000 Seat belts; for special purpose, passenger cars, other motor vehicles manufactured for the transport of people

32 870830100000 Brakes and servo brakes and parts of motor vehicles, tractors, motorcycles for special purposes, carrying goods and people.

33 870830910000 Land vehicle brakes and servo-brakes and their parts and components

34 870840200000 Gearboxes and parts for the assembly industry of land vehicles

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35 870840500000 Gearboxes of land vehicles

36 870840910000 Land vehicle gearbox parts (of steel forged in closed mold)

37 870840990000 Land vehicle gearbox parts (others)

38 870850200011 Carrier axles for the assembly industry of land vehicles

39 870850200019 Other purpose axles for the assembly industry of land vehicles

40 870850350011 Carrier axles of K vehicle for other purposes

41 870850350019 Axles of land vehicles for other purposes; others

42 870850550000 Parts of land vehicle axles (of steel forged in closed mold)

43 870850910000 Parts and assembly of land vehicles carrying axles (others)

44 870891350000 Radiators of snow vehicles for other purposes

45 870892200000 Exhaust mufflers and pipes for the assembly industry of land vehicles

46 870893900012 Parts and parts of clutches (except those used in assembly industry)

47 870894200011 Steering wheels for the assembly industry of land vehicles

48 870894200012 Steering columns for the assembly industry of land vehicles

49 870894200013 Mechanical steering gears for the assembly industry of land vehicles

50 870894200014 Power steering boxes for the assembly industry of land vehicles (weight = <30 kg.)

51 870894350012 Steering columns of land vehicles for other purposes

52 870894350014 Power steering boxes of land vehicles for other purposes (weight = <30 kg.)

53 870894990000 Other parts of steering wheel, column, box for land vehicles

54 870895100000 Inflatable air bags for the assembly industry of land vehicles

55 870895910000 Inflatable air bags for motor vehicles and their parts and parts (of steel forged in closed mold)

56 871160900012 Motorcycles (including mopeds), baskets; those driven by the electric motor, whose motor power does not exceed 20 kW

57 871410900000 Other parts and accessories of motorcycles (including mopeds)

58 871690900012 The brakes of trailers, semi-trailers, etc. evening; pieces

59 880240009000 Other aircraft (curb weight> 150 00 kg)

60 880320000000 Landing gear etc. parts and components; aircraft

61 880330000000 Other parts of aircraft and helicopters

62 880390900000 Parts of other aircraft of headings 88.01 and 88.02

63 880521000000 Air combat simulator and parts thereof

64 940110001000 Seating furniture for civil aircraft (not leather-covered)

65 940110009000 Seating furniture for other aircraft

66 940190100000 Parts of seating furniture for aircraft

TR33 REGION

AUTOMOTIVE INDUSTRY ANALYSIS REPORT and GUIDE

COVID-19 Crisis Response and Resilience Project

AUTOMOTIVE INDUSTRY ANALYSIS REPORT and GUIDE

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