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GUIDE TO FLEET MANAGEMENT 2014

NEXUS COMMUNIC ATION - GLOBAL FLEET - GUIDE – FEBRUARY 2014 - PRICE: USD 165 / EUR 125

TURKEY

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Guide to Fleet Management in Turkey Dear reader,

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COLOPHON Caroline Thonnon – Global Fleet Leader cthonnon@nexuscommunication.be Steven Schoefs – Chief Editor sschoefs@nexuscommunication.be Laetitia Fernandez – Content & Community Editor lfernandez@nexuscommunication.be Frederic Van Vlodorp – Managing Editor Fvanvlodorp@nexuscommunication.be Sigrid Nauwelaerts – International Key Account Sales snauwelaerts@nexuscommunication.be David Baudeweyns – International Sales & Business Development dbaudeweyns@nexuscommunication.be Romina De Gregorio – Internal Sales & Operations rdegregorio@nexuscommunication.be Vanessa Digneffe – Internal Sales Support vdigneffe@nexuscommunication.be Contributors: Jean-François Christiaens, Tony Elliott, Jonathan Green, Tim Harrup, Frank Jacobs, Ally Millar, Bart Vanham With special thanks to Tolga Özgül (TOKKDER), Graeme Banister (Frost & Sullivan), Müge Çınarlı Söyler (ODD), Yasemin DAĞ (PETDER), Dominique Cardineau (Fleetcorp), Pascal Belot (PSA Peugeot

Citroën), Gabriel Juhas (Dataforce), PwC Turkey Layout: Un pas plus loin – info@unpasplusloin.com

EDITOR Thierry Degives, Managing Partner at Nexus Communication SA, Parc artisanal 11-13, 4671 Barchon (Belgium) T : +32 4 387 87 94 – Fax : +32 4 387 90 63 www.nexuscommunication.be contact@nexuscommunication.be GLOBAL FLEET TURKEY is a special issue of www.globalfleet.com, the first networking and crossmedia platform for multinationals willing to optimize their fleet management through globalization. Reproduction rights (texts, advertisements, pictures) reserved for all countries. Received documents will be not returned. By submitting them, the author implicitly authorizes their publication. Circulation: The Guide to Fleet Management Turkey 2014 will have two separate language versions: 1500 copies in English + 4000 copies in Turkish. This first Turkey’s Guide is available (English or Turkish) on www.globalfleet.com/shop Price: EUR 125 – USD 165

It is with great pleasure that we present you with this Guide to Fleet Management in Turkey, the second publication in a series of fleet management guides whose first edition was dedicated to Brazil. You can find all our publications on our e-Shop: http://shop.nexuscommunication.be/. With this Guide we intend to share detailed insights on the Turkish fleet market, but also on the country’s economy, history and automotive landscape. To do so the Global Fleet team met with – and gathered data from – a wide range of fleet stakeholders. However it is difficult to find transparent or official car fleet data available in the country, so the inputs we have collected from different sources we have tried to interpret in a neutral manner. Turkey is a regional superpower that is booming on all fronts. It is a complex market, still immature on the fleet side, with currency volatility and unpredictable taxation changes, where LCV leasing is forbidden by Law, and with one of the most expensive fuel prices in the world. It is most exciting to do business in Turkey: at 9% growth over the past three years and with a young workforce striving to compete and succeed, the former Ottoman Empire is foreseen to become the world’s 10th largest economy by 2050. Turkey’s young population has a huge appetite for cars – drivers still see their four-wheelers as a status. And nothing will stop the automotive and fleet market’s progression in the future. So now more than ever, changing mindsets is needed in the Turkish fleet world: not only are car fleet players pushing for operational leasing to become the preferred financing mode – as opposed to outright purchase – and to highlight the meaning and importance of Total Cost of ownership… they realise it is time for a change as they are shaping the future of fleet management in the country. Global Fleet has therefore decided to shed some light on this unique fleet market in hopes that whoever reads this Guide feel as enthusiastic as we were about diving into Turkey’s complexities. Caroline Thonnon Global Fleet Leader

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CONTENT

COUNTRY LANDSCAPE

FLEET AND AUTOMOTIVE LANDSCAPE

PROFILE

Between East and West, the religious and political differences, and the ambitions of Turkey to become part of the European Union. A look at the country’s history and heritage. >> p.6-7

AUTOMOTIVE & FLEET DATA

The automotive market in Turkey is a market set to grow, with demand for light vehicles estimated beyond 1 million after 2016. And the fleet market will follow the trend. >> p.16-35

BACKGROUND

The Turks who protested in May 2013 are a minority in the country. Istanbul isn’t Turkey, and Turkey isn’t Istanbul – but where is the country headed? >> p.8-9

FINANCE & SUPPLIERS

How to finance a corporate fleet - our guide discusses solutions and provides concrete examples from the business world. >> p.37-59

POLITICAL STRUCTURE

From Atatürk’s liberal notion of Kemalism to the AK Party’s pro-islamist reforms, Turkey’s political structure is changing – for better or for worse? >> p.10-11

TAXATION & LEGISLATION

Knowledge of Turkey’s tax system and other regulations is essential to manage a corporate fleet. >> p.60-66

ECONOMY

Turkey is predicted to become the world’s 10th largest economy by 2050. At 9% growth, Turkey can be considered as Europe’s China. >> p.12-14

TRENDS & FORECAST

A review of future challenges from the perspective of past European experience and present Turkish reality. >> p.68-87

CASE STUDIES

Companies already operating in-country share their experiences, to help you better understand the Turkish fleet market. >> p.90-98

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© Thinkstock / design-ist

AUTOMOTIVE & FLEET DATA

Increasing per capita income and demand for company cars are some of the factors pushing estimated demand for light vehicles beyond 1 million after 2016.

One million vehicles can’t be wrong As you would expect from an emerging market, Turkey’s automotive market is growing at a robust pace. If current trends continue, the number of vehicles sold per year should pass the 1-million marker by 2016. But a few local peculiarities warrant a closer look at the Turkish market: without domestic hydrocarbon reserves, fuel is expensive. This influences the popularity of certain models and motorisations. Taxation adds to the burden.

I

n 2012, there were just over 17 million vehicles on the road in Turkey. Of those, nearly 51% (i.e. 8.6 million) were personal cars (PCs). Light commercial vehicles (LCVs) amounted to 18.5% (3.1 million), heavy trucks came up to 4.5% (about 750,000). Motorcycles represented about 15.5% (2.6 million), while tractors came up to 9% (1.5 million). Buses (1.5%) and minibuses (2.5%) together amounted to almost 700,000 vehicles. The annual growth rate for light vehicles (cars and LCVs) between 2009 and 2012 was around 7%, or 22% in total over just three years. All of this adds up to a great number of vehicles on Turkish streets and highways. But in the wider context of Turkey’s growing population (75 million in 2012) and its booming economy (+9.2% in 2010, +8.5% in 2011, +2.2% in 2012), these numbers still leave a lot of margin for growth. Take for instance the number of vehicles per 1,000 inhabitants: this was a mere 104 in 2010 for Turkey. In the same year, the rate in Romania was ap-

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proaching 250, and 400 in Croatia and Bulgaria. In developed economies like France and Germany, it is around 500.

Regional distribution The automotive market is distributed unevenly across the country, in line with population density, which is concentrated on the western edge of the country. The centre of gravity for Turkish economic life, and also for the automotive market, is Istanbul. In all, there are about 2.7 million cars and LCVs driving around the metropolis on the Bosphorus. The second-biggest regional automotive market is the second-biggest city – the inland capital of Ankara, representing 1.3 million light vehicles. The third centre is Izmir, the tourist hub on the Mediterranean coast, with 750,000 cars and LCVs. Together, this Top 3 represents almost half of all cars and LCVs in the whole country, with the other 79 regions making up the rest (see Figure 1).


Figure 1: Registrations per region in 2012 (1) Istanbul

Ankara

Izmir Bursa Antalya Adana

Other 76 regions

As in many other emerging markets, Turkey is undergoing rapid urbanisation, with about 75% of the population predicted to live in Istanbul, Ankara, Izmir and other cities in the near future. This will likely give the dynamic automotive market another push towards further growth.

New car registrations In 2010, 57% of all cars sold in Turkey were imported. Conversely, over 70% of domestically manufactured vehicles

(about 1 million in total) were sold abroad. This demonstrates the high degree of integration of the Turkish automotive market into the international market. In 2011, the total number of new car registrations in Turkey was 868,434, of which 806,298 were private (i.e. 92.8%) and 62,136 commercial (7.2%). In 2012, there was a significant drop in the overall figure, by 10.3%, to 778,654 new car registrations. The biggest drop was in the private segment, by 11% to 717,270. The drop in commercial registrations was only slight, by 1.2% to 61,384 new registrations. Two main factors explain the downward trend of 2012: an economic slowdown, and an increase in vehicle taxes. By 2013, the downward trend had reversed again. Figures to Q3 (January up to and including September) showed overall registrations at 645,313, with registrations of private vehicles at 593,926 and commercial vehicles at 51,387. Extrapolating for the entire year, that gives us a figure between 830,000 and 870,000, roughly at the volume of 2011 – except for the commercial segment, which would be up by more than 10% compared to 2011. The historically low level of car ownership, increasing per capita income (USD 25,000 or EUR 18,500 by 2025) and increasing demand for company cars are some of the factors pushing estimated demand for light vehicles on the Turkish market beyond 1 million after 2016.

New car registrations in Turkey (2)

2011

2012

2013 (Q1-Q3)

Total

Total

Total

806,298

717,270

593,926

62,136

61,384

51,387

868,434

778,654

645,313

CARS

LCVS

CARS

LCVS

CARS

LCVS

592,784

213,514

558,335

158,935

492,202

101,724

9,464

52,672

7,456

53,928

5,082

46,305

602,248

266,186

562,791

212,863

497,384

148,029

Corporate

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Private


FINANCE & SUPPLIERS

Funding in Turkey: The picture is changing Turkey is one of those markets where the preferred acquisition method has traditionally been outright purchase. So is the situation changing? Turkish Auto Leasing and Rental Companies Association TOKKDER thinks it is. Its General Coordinator Tolga Özgül explains some of the new thinking.

O

nly 170,000 units of the corporate fleet are acquired through operational leasing, which clearly indicates that the operational leasing industry has a remarkable growth potential. We are expecting that fleet size of the operational leasing sector will reach 400,000-500,000 units within 5-6 years from now. Why will companies change to operational leasing? T. Özgül: Fleet owners are more cautious nowadays, TCO is becoming important, and they are aware of the importance of residual values. SMEs which continue to purchase

their cars need to put money aside for this, which could otherwise be spent on their core business. And now they are indeed beginning to spend their money on their core businesses, so ownership is falling in popularity while leasing is growing. Then there is the issue of tax benefits where there are a number of benefits in terms of corporate and VAT taxes. And SMEs are also beginning to realise the benefits of leasing rather than buying from a services point of view. They do not have to pay more for servicing, they get winter tires… Along with this, they save in terms of human resources and of administrative time. The operational leasing contract provides so many of these things for them. How important is the residual value element for the growth potential of operational leasing? T. Özgül: Yes, another important point is remarketing – residual values are really high in Turkey, but a fleet manager cannot know what the value of his car will be in three or four years. However, under an operational leasing contract, fleets do not bear this financial risk. The leasing company takes this on. For all these reasons operational leasing is getting more popular in the business world. ■ Frank Jacobs

Tolga özgül: “Fleet owners are more cautious nowadays, TCO is becoming important.”

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Further information on TOKKDER can be found on page 46.


FINANCE & SUPPLIERS

The main rule that applies to the growing Turkish fleet market is: Caveat Emptor, let the buyer beware.

Customs & peculiarities of the Turkish fleet market With the introduction of the international leasing companies into what was an insular local Turkish operational leasing market, some interesting contrasting approaches appear in the service offerings to the customer base.

S

trikingly enough, some local players offer unlimited mileage operating lease agreements in Turkey – whereas international players offer an agreement where the operating risks are premised upon a given anticipated period of lease and total mileage. These age and mileage premises are flexible. But a clear, broad all encompassing ‘unlimited mileage’ is not offered to customers. It is very difficult to determine a residual value without first determining the intended period of use and the expected total mileage to be travelled during that term of lease. Taking an actuarial risk without these two vital factors is unwise, if not commercially suicidal. The lease supplier has to, one way or the other, protect its risks.

Unlimited or flexible mileage But, as has been experienced in Brazil, this generous offer of unlimited mileage can only be made if the mileage of

each and every vehicle on lease is determined regularly and correctly by the lease company. The customer has to agree that the leased vehicles may be swapped regularly between drivers; low mileage users get placed into high mileage vehicles and vice versa. This way the entire fleet is viewed as a single mileage entity and the residual value risk levels out on a swings and roundabouts basis; perhaps. The alternative to unlimited mileage is the flexible mileage service offered by the international companies, with contract variations, excess mileage and under mileage recalculations. This is a better way in which to manage each vehicle on lease, but it also needs careful care and attention by the customer. It is suggested that the customer would need to receive a report which shows the Actual Mileage Travelled versus the Total Contract Mileage paid for.

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TRENDS & FORECAST

Turkey has a very low penetration of vehicles to population ratio, so there is a pent-up need for vehicles.

Looking forward Overall the Turkish fleet market has been around for decades and, from a local viewpoint, quite successful. Although the market has not fully matured yet, it is set to grow at a terrific rate and holds great promise. We present you with an overview of the trends that rule the Turkish fleet market to date.

T

he local players have met the fleet vehicle and fleet finance needs of the local customers. Some of these local fleet leasing suppliers have evolved from their origination: car rental companies, banks and vehicle dealerships. Subsequently, and understandably, their product offerings reflect their originations. Turkey has a very low penetration of vehicles to population ratio, so there is a pent-up need for vehicles. The Turkish population, the majority being young, and many very well educated, have had their aspirations increased and now represent a very exciting, dynamic and challenging workforce for their country. Turkish companies utilise the provision of a company car to entice the best employees in a very competitive employment market.

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Some of the international customers’ requirements are beyond the current ability of Turkey to supply.

„


A promising market The Turkish economy is booming. The international customers have seen the business and market opportunities and have set up operations in Turkey. With them, they bring their finely tuned corporate policies. The policies have evolved over decades and have reached a maturity that is not matched in other, less developed countries. International fleet and leasing suppliers have also set up operations within Turkey; doing so because of the opportunities that they see in that country and also beholding the demands being made by their international customers. These suppliers are well versed in the Western needs of their Western customers and are very willing to offer those same services in Turkey.

Driving the market These international company corporate policies, including their special product and service requirements from fleet vehicle and leasing suppliers, are out of synchronicity with the current Turkish market. This is overall a good opportunity to drive the Turkish fleet market, and accelerate the evolution towards maturity. However, some of the international customers’ requirements are beyond the current ability of Turkey to supply. So, pro tem, these requirements need to be modified. ■ Tony Elliott

Trends at a glance • The Turkish private vehicle and fleet vehicle market growth will continue to rapidly expand over the next four years. • The current low penetration of operational leasing in Turkey will increase substantially over the next four years. Growth is anticipated to be at least 11% CAGR. • Current vehicle taxation is based upon a cubic capacity (CC) rating. The current trend for users to choose 1600cc and less will continue. • Car fleet players will continue to improve their fleet and leasing services to customers. • International players will continue to set up operations in Turkey. Existing international players in Turkey will continue to penetrate the home market at the expense of the local players. • International players will modify their service expectations where those services are not possible due to the Turkish taxation regimes differing from those Western taxation regimes (i.e. CO₂). • The installation of telematics into Turkish fleet vehicles will continue to expand. • Fuel will continue to be very expensive, and systems will be derived to capture all of the criteria required to arrive at a useful and complete fuel management reporting tool.

© Thinkstock / Jelena Savic

• TCO or WLC will continue to penetrate the fleet market as a vehicle cost selector.

Leasing agreements will become more substantial, clearer and have any ambiguities removed.

• Leasing agreements will become more substantial, clearer and have any ambiguities removed. • The SME market, which is huge in Turkey will continue to move towards operational leasing. • Car policies will continue to evolve within Turkey, using the data derived from effective reporting tools, TCOs and complete fuel management reports to not only satisfy the drivers’ aspirations, but also assist in driving fleet costs down.

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CASE STUDIES

AstraZeneca: Keep it simple doesn’t mean it’s easy AstraZeneca has a fleet of around 500 cars and a “simple”, almost one-sizefits-all approach to fleet provision. But weighing up the pros and cons of all possible providers, prioritising service over price and keeping staff happy is a delicate balancing act. Further insight into AstraZeneca ’s fleet in Turkey is provided to Global Fleet by Procurement Manager Yelda Özlem Kabaklarli. Tell us about AstraZeneca’s car fleet in Turkey… Yelda Özlem Kabaklarli: We have a fleet of around 500 cars, and three levels of staff allocation. The top management level has premium cars such as the BMW 520. The second and third levels go to the field force: sales representatives, company contact associates, sales managers, senior sales managers and head office managers. At the moment VW Polos and Golfs and some Peugeot 508s make up the second and third levels. When the contract for the current cars end, we will look for equivalent cars in the market.

The right level of service is even more critical than price.

Which lease companies do you use? Y. Kabaklarli: Around 90% of our contracts are with LeasePlan. They are one of our global providers, and we have open ended contracts with them. We do ask other leasing companies because the sector isn’t very stable in Turkey in terms of price. Our main contracts are for 36 months and we use full operational leasing which includes insurance but not fuel. We use one fuel company, and drivers must adhere to this.

Yelda Özlem Kabaklarli: “We don’t simply choose the cheapest car and impose it – it has to be an optimal choice for the many considering various dimensions.”

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Would you use a local provider? Y. Kabaklarli: It is important to go to the market and find a balance between a cheaper offer and the open calculation method. We did use a local company with a good price some years ago, but they couldn’t hold that price after a couple of years. It is helpful to meet with the local com-


Guide to Fleet Management 2014 Turkey, excerpt