Türkiye's automotive market could see dynamics changing in 2024, with industry officials linking the course to access to loans and financing, foreseeing a moderating momentum after car sales topped 1 million units for the first time even before the end of the year.

The peak came despite skyrocketing prices, as households saw cars as an investment tool to shield themselves from double-digit inflation, which reached nearly 62% in November.

Sales registered 10 consecutive monthly records before November, despite a sharp rise in the costs of loans for vehicles after six successive months of interest rate hikes by the central bank aimed at cooling demand and stemming inflation.

Some 1.07 million passenger cars and light commercial vehicles have been sold from January through November, according to industry data, a 60.8% year-over-year increase. The earlier annual all-time high stood at 984,000 units in 2016.

According to experts, financing challenges partially dampened demand, but sales remained vibrant due to deferred demand and campaigns and concerns about the depreciation of the Turkish lira.

If sales in December match last year's levels, the year-end total could reach 1.2 million units.

The overall potential volume is at a band between 750,000 and 1 million, according to Honda Türkiye Senior Deputy General Manager Bülent Kılıçer.

"At this point, the total market, including light commercial vehicles, is at over 1 million. The passenger car market will be around 850,000-875,000 with December data. This translates into an approximately 65% increase compared to a year ago. It is also 25%-20% higher than our expectations," Kılıçer said.

However, Kılıçer expressed less optimism for 2024, citing issues in loan usage and accessibility, among others.

"In 2023, we actually sold 20% of 2024. This means that people who did not plan to change their vehicles until September, maybe those who wanted to change their vehicles in 2024 or 2025, found and bought them due to availability problems," he explained.

Kılıçer sees sales at around 750,000 in 2024 and also predicts an increase in prices due to the volatility in exchange rates. But he added industry campaigns may continue in January, although not as extensive as at the end of the year.

Japanese carmaker Toyota's Türkiye Marketing and Sales Director Ali Haydar Bozkurt said 2024 would be a year in which companies would pursue campaigns whenever there is an opportunity.

"The rise in vehicle prices, credit costs, and difficulties and restrictions in accessing credit may cause the market to shrink by 30%-35%," Bozkurt noted, forecasting a market volume of 750,000-800,000 units.

The aggressive tightening after the May elections took the Central Bank of the Republic of Türkiye's (CBRT) key policy rate to 40% from 8.5%.

Vehicle loan interest rates, which stood at 25% before the elections, have surged to more than 45% since the end of September. Additionally, due to Banking Regulation and Supervision Agency (BDDK) restrictions, loan usage on most vehicles is limited to less than one-third of the price.

Murat Berkel, general manager of Hyundai Assan, reflected on 2023 as a year that exceeded expectations, stressing that they increased sales by supplying vehicles "beyond our business plans."

"In 2024, we expect different scenarios to unfold," Berkel added. He highlighted the potential impact of the March elections and possible changes in the financial markets.

"We anticipate that sales will be at lower levels compared to 2023," he added. Still, Berkel emphasized the momentum in sales of electric vehicles, estimating that EVs would reach 15% of the passenger car market next year.

"In summary, both interest rates and the difficulties in accessing credit, as well as economic developments in the financial markets, can change the dynamics of the sector. We estimate the total sales volume likely to occur in 2024 at 875,000."

Ali Bilaloğlu, head of Doğus Automotive, a Türkiye-based exporter, said the industry is a sector that can react quickly, draw conclusions from the situation it faces and rebuild its future plans.

He said they expect passenger car sales to reach 930,000 and commercial vehicle sales to reach 270,000 at the end of the year, closing the total market at 1.2 million.

Bilaloğlu expects a 30% contraction next year.

Hakan Tiftik, head of Borusan Automotive, attributed the 2023 momentum to the gradual decrease in global issues affecting the sector, the accumulated demand for vehicles over the last three years, and increased availability.

Tiftik also cited the inflationary environment faced by the world's leading economies, recalling that the country made a challenging start to 2023.

"Local elections to be held in March, more developments in the region and fluctuations in global economies are factors that will determine the course in 2024," he added.

Tiflik said prices depend on "many parameters, especially exchange rates," and that they will be directly affected by the "easing of vehicle availability compared to the previous period."