BYD, the world’s largest manufacturer of electric vehicles (EVs), has found a way to bypass European tariffs by leveraging Turkey’s strategic position. For Turkish President Erdogan, this development marks a significant achievement.
For the first time in 27 years, a foreign automotive company is establishing a new factory in Turkey. This week, Chinese EV producer BYD signed an agreement with the Turkish Ministry of Industry for an investment of approximately one billion dollars.
According to Minister Mehmet Fatih Kacir, the new facility will have an annual production capacity of 150,000 vehicles and is expected to create 5,000 jobs. Production is slated to begin by the end of 2026.
Export to Europe
BYD is aggressively expanding into the European market, evidenced by its prominent advertising presence during the European Football Championship. The planned factory in Turkey is expected to support this expansion.
The European Union has imposed tariffs on EVs from China to counteract the competitive advantages gained through Chinese subsidies. However, vehicles manufactured in Turkey are exempt from these tariffs due to a customs agreement with the EU.
BYD’s head of European operations recently told the Financial Times that shipping cars from China to Europe is not a sustainable long-term strategy. The future lies in local production. BYD is also building a factory in Hungary.
In addition to exporting to Europe, Turkey represents a valuable market for the Chinese company. In 2023, sales of electric vehicles in Turkey skyrocketed to nearly 70,000 units, an eightfold increase from the previous year.
A Long-Awaited Success
The Chinese investment is a significant boost for Turkey on multiple levels. Although international companies acknowledge Turkey’s potential and attractiveness as a location, the country’s economy has been marred by negative headlines, particularly concerning its high inflation rate, which stood at 71.6 percent in June.
Following a major policy shift under the new Finance Minister Mehmet Simsek, which included a drastic rise in interest rates, efforts are being made to restore lost confidence. After years of unconventional monetary policies, Turkey is in dire need of foreign investments.
Turkey’s appeal lies in its young and dynamic population, large domestic market, and strategic geographic position as a bridge between Asia and Europe.
Initially, the focus was on near-shoring—Western companies reducing their dependency on China by setting up production closer to home. However, BYD’s example shows that Turkey is also attractive for the opposite trend: the expansion of Chinese companies into Europe.
