Chinese electric-vehicle maker BYD will invest $1 billion in Turkey to set up an EV and plug-in hybrid vehicle factory with an annual capacity of 150,000 units, creating a second European production and export hub after the one it is building in Hungary.
BYD Chairman Wang Chuanfu and Turkish Industry and Technology Minister Mehmet Fatih Kacir signed an investment deal here on Monday. Turkish President Recep Tayyip Erdogan attended before leaving for the NATO summit, which begins in Washington on Tuesday.
The location of the factory was not announced in a statement released after the signing ceremony. Bloomberg reported Friday that it would be built in Manisa province, which is about 40 kilometers from Izmir, a major port on the Aegean coast. BYD will also establish a research and development center in Turkey.
The deal comes on the heels of the opening last week of a BYD plant in Thailand, its first in Southeast Asia.
This will be the first EV factory owned by a foreign manufacturer in Turkey. The facility is slated to begin production before the end of 2026 and is expected to employ 5,000 people.
Thanks to Turkey’s “unique advantages such as its developing technology ecosystem, strong supplier base, extraordinary location, and skilled workforce, BYD’s investment in this new production facility will further develop the brand’s local production capabilities and increase logistical efficiency,” the automaker said in a statement.
“We aim to reach consumers in Europe by meeting the growing demand for new energy vehicles in the region,” BYD said,
Kacir said that Turkey is the third-largest car manufacturer in Europe and that “we see the transformation towards new-generation and environmentally friendly electric vehicles as a primary goal in the automotive sector, which is the leading sector in exports, with an annual volume exceeding $35 billion.”
The country produced more than 1.4 million autos in 2023, of which about 70% were passenger cars. Turkey, a bridge between Asia and Europe, has a customs union agreement with the European Union as well as free trade agreements with more than 20 countries, including neighboring Egypt and Georgia as well as South Korea, Malaysia and Singapore. It has been negotiating with Japan for years to conclude an economic partnership agreement.
Turkey hosts many global brands, such as Toyota, Ford, Renault and Hyundai, as a production and export base.
From left, Turkish Industry and Technology Minister Mehmet Fatih Kacir, Turkish President Recep Tayyip Erdogan, and BYD Chairman Wang Chuanfu at the signing ceremony in Istanbul on July 8. (Ministry of Industry and Technology)
Roughly 65,000 EVs were sold in Turkey last year, accounting for around 7% of total passenger car sales in the country.
About five years earlier, Turkish EV brand Togg was established by four industry giants and the country’s largest nongovernmental organization. Togg controlled almost 30% of Turkey’s EV market in 2023, followed by Tesla at 18.5%. Elon Musk’s company entered Turkey that April. BYD entered that October and sold less than a thousand units of its Atto 3 to finish the year with a little more than 1% of the market.
Also in 2023, a joint venture of Togg and China’s Farasis Energy began producing battery modules and packs. It plans to start making battery cells in 2026, aiming to reach a 20-gigawatt-hour capacity.
Turkey has been trying to protect Togg from foreign competition in general and from Chinese brands in particular.
In March 2023, Turkey moved to impose a 40% import tariff on EVs made in China on top of an existing 10% levy. It later took additional measures, such as mandating that EV manufacturers from countries with which Turkey has no free trade agreement establish at least 20 maintenance and repair service centers across the country that should be owned by themselves or their distributors. This affected Chinese and Japanese brands.
This defense of Togg caused Chinese EV sales to drop and brands to push exports of internal-combustion and hybrid models in Turkey.
The Turkish government responded this June by expanding the 40% additional import tariff to all automobiles imported from China. The Ministry of Trade explained that the measure was meant “to increase the share of local production which has been in decline within the domestic market.” It also said the expansion was due to “developments related to foreign trade balance and our country’s current account deficit targets.”
Finally, the ministry said, the scope of the 40% tariff was widened “to encourage investment and production inside Turkey.”
Turkey’s hardball seems to have worked. The day after Erdogan met with Chinese leader Xi Jinping in Kazakhstan on the sidelines of the Shanghai Cooperation Organization summit, Turkey softened the measure this past Friday by waiving the additional 40% tariff for brands that invest in Turkish production.
“The Turkish government’s move to impose an additional 40% levy convinced BYD to invest in Turkey by exempting the company from the charge,” said Erol Sahin, general manager of automotive consultancy EBS. “Other Chinese EV brands such as Chery, Geely may follow BYD to produce in Turkey,” Sahin told Nikkei Asia.
BYD may be using Turkey and its EU customs union agreement as an escape valve of sorts. The EU last week imposed a provisional 17.4% tariff on BYD EVs built in China on top of the existing 10% levy on standard cars. The EU’s provisional tariff comes with the U.S. already having moved to quadruple duties on China-made EVs to over 100%.
BYD is already building a factory in Hungary, which joined the EU in 2004 and is preparing to adopt the euro. A Turkish factory will bolster these plans.
The company is also constructing a new factory in Brazil and is in talks to establish one in Mexico.
The last foreign auto brand to establish a factory in Turkey was Honda back in 1997. That plant was shut down in 2021 after the Japanese brand decided to withdraw from European auto production altogether.
In 2019, Turkey came close to clinching its first new foreign brand production investment in more than two decades. At the time, Volkswagen was close to announcing that it would break ground in Manisa. But that deal was scuttled, first by Turkey’s military operation in Syria and later by pandemic-related developments. The German carmaker scrapped the plan in 2020.