Turkey on Friday increased the price threshold to impose a special consumption tax (ÖTV) on some new vehicles, a move that will prompt price cuts and boost sales.
The tax base for some cars was raised in lower-tier tax brackets, which cover the bulk of the car market, according to a presidential decree published in the Official Gazette. The ÖTV rates on car purchases were kept unchanged.
The new price threshold for cars with engine capacity of up to 1,600 cubic centimeters that are included in the 45% tax bracket has been increased to TL 92,000 ($10,770), up from TL 85,000.
The previous base of over TL 85,000 but below TL 130,000 for vehicles included in the 50% ÖTV bracket has been lifted to TL 92,000-TL 150,000 range, according to the decree. The price threshold of TL 130,000 and above for vehicles in the 80% tax bracket has been increased to TL 150,000 and above.
For cars with an engine capacity of over 1,600 cubic centimeters but below 2,000 cubic centimeters, the ÖTV price threshold has been increased to TL 114,000-TL 170,000 range, up from TL 85,000-TL 135,000.
The tax base change has lead to price cuts of more than 16% for certain cars, according to sector representatives, while it is also expected to prompt a roughly 10% decline in the secondhand market.
Shares in Turkish auto manufacturers Tofaş and Ford Otosan and automotive importer and distributor Doğuş Otomotiv were up at market opening while the bluechip BIST 100 index traded flat.
The regulation will reflect positively and prices could fall in some models and brands, Hayri Erce, the head of the Automotive Distributors’ Association (ODD) said, noting that the volatility in the exchange rates and high interest rates made access to cars increasingly difficult.
