Passenger car and light commercial vehicle sales in Turkey surged 82.35% year-on-year in September, the Automotive Distributors' Association (ODD) announced Wednesday.

The rise comes amid a drop in borrowing costs since the Central Bank of the Republic of Turkey (CBRT) started slashing interest rates in July, followed by a campaign initiated by public lenders last month to spur domestic demand and that offers cheaper loans to citizens when they buy domestically-made vehicles from select manufacturers. Several top auto manufacturers announced yesterday they were also joining the campaign.

Sales totaled 41,922 during last month, the association said in a statement. Passenger car sales doubled in the month on an annual basis – from 17,595 to 35,308 – while light commercial vehicle sales rose by 23.03% to reach 6,684.

An increase in sales in September stemmed mainly from a base effect, however, a fall in interest rates on loans after rate cuts by the CBRT also affected, a sector source told Reuters.

The rise comes after months-long narrowing in the market, which has been contracting since last April. High volatility in foreign exchange rates, followed by a high increase in interest rates on loans led to a sharp decline in domestic demand.

However, banks started decreasing interest rates on vehicle loans since the CBRT kicked off an easing cycle in its monetary policy and went on to cut its benchmark policy rate, the one-week repo rate, by 750 basis points since mid-July.

In its July meeting, the bank cut the benchmark interest rate by 425 basis points to 19.75%. It delivered its second aggressive policy easing in its September meeting, cutting its policy rate by 325 basis points to 16.5%.

In the face of rising inflation, the CBRT had increased the interest rates to 24% in September 2018, from 17.75% at the time.

After rate cut, average interest rates

on vehicle loans dropped to sector-supportive 1.5% as of mid-September, from a level of 2% as of the end of June, according to Reuters.

GREAT INTEREST IN CHEAPER VEHICLE LOANS CAMPAIGN

In a joint statement on Sept. 26, the three state lenders, Ziraat Bank, Halkbank and Vakıfbank said they were initiating a campaign that offered lower interest rates on loans to purchase locally produced cars.

The three banks slashed the monthly cost of the 18-36 month loans for cars produced in Turkey and sold at a price between TL 50,000 and TL 120,000 to rates between 0.49% and 0.69%.

The lenders said they would also extend 30-60 months loans at the monthly interest rates between 0.49 percent and 0.69 percent for commercial vehicles sold for TL 72,000 and TL 120,000.

The financing package is made available from Oct. 1 to Dec. 31.

Auto manufacturers Mercedes and Toyota yesterday said they were also joining the campaign. The public lenders had already inked agreements with Fiat, Honda, Hyundai, Renault Mais, Ford, Isuzu, Karsan, Temsa, Otokar and BMC as part of the financing package.

Meanwhile, the automotive market narrowed by 39.3% in the first nine months of 2019, the ODD said. A total of 281,309 vehicles were sold in the nine-month period, down from 463,456 vehicles in the same period last year.

Passenger car sales fell by 36.92% to 228,628, and light commercial vehicle sales dropped by 47.84% to 52,681 in the January-September period.

Some 55.8% of all 228,628 automobiles have diesel engines, while the share of vehicles with petrol engines was 36.65% - autogas took 4.15% share, hybrid 3.34% and electricity 0.06%.

While car sales for almost all engine types posted declines year-on-year in the first nine months, hybrid and electric car sales increased by 142.2% and 4.92%, respectively.

Among light commercial vehicle sales, van-type vehicles' share was 71.45% in the same period, following by light trucks (12.4%), minibuses (8.5%) and pick-ups (7.7%).

Prominent automotive manufacturers including Fiat, Ford, Honda, Hyundai, Mercedes, Renault, and Toyota have manufacturing operations in Turkey which is among the world's top auto sale markets.

In Turkey, a total of 620,937 automobiles and light commercial vehicles were sold last year, down from 956,194 in 2017.