The success of the Turkish the automotive parts sector has made it a
poster child for the power of competitive intensity. Exports have grown by 12
percent a year since 1996 as Turkish companies aggressively compete on the
global market. Productivity rates are 91 percent of U.S. levels though specific
barriers keep it from moving substantially higher.
Global Integration Leads to Growth
The automotive parts sector is one of the sectors in Turkey that has been most exposed to global best practice through direct investment, exports, and imports. In 1996, the Customs Union Agreement threw open the doors and there are now more than 150 foreign partnerships introducing global best practices to Turkish companies. Foreign manufacturers are attracted to Turkey with its skilled but cheap labor force and relative absence of productivity constraints.
The high levels of productivity in the sector follow world-class players. The high productivity is also essential to hold Turkey's position in global supply configurations in the face of competition from other emerging markets.
Barriers to Potential
One of the remaining barriers to productivity in the sector has been the series of sharp macroeconomic contractions and expansions in the 1990s. The oscillation has caused dramatic domestic demand swings and in turn has resulted in relatively low capacity utilization. Cost-conscious consumers, in turn, have moved towards the purchase of substandard parts manufactured by traditional but inefficient plants. Many of these operators also enjoy the benefits of informality, i.e. avoiding tax and regulatory obligations.
The automotive parts industry is also beholden to informal upstream suppliers, who generally also are traditional, inefficient operators lacking the ability to mesh logistics productively with the manufacturers.
World-Beating Potential
The government has a key role to play in lifting the sector's productivity to its potential of 127 percent of U.S. levels. Policymakers must enforce tax laws as well as safety and quality codes to force traditional fabricators either to modernize or to exit the market. And they must dampen the macroeconomic swings that create conservative consumer behavior.
Success will help
ensure that Turkey remains a preferred supply chain partner for global
enterprises, even as other countries try to exploit lower labor costs. Success
could also lead to 8 percent per annum output growth and the creation of 170,000
new jobs by 2015. Launch this chapter (PDF - 448 KB)
