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With just 74 cars per 1,000 people, Turkey has the highest potential for market growth anywhere in Europe. Its available skills, competitive labour costs and emergence as a base for vehicle research and development make it an interesting proposition for carmakers, as James Griffiths reports

For a long time Turkey’s place in the industry has been considered as little more than a manufacturing station for a handful of European carmakers. But that is changing. It is now recognised for its relatively high skills compared with other low-cost regions, with competitive wage levels and the opportunity for research and development to be performed locally.

Passenger car production has increased sharply in recent years, from fewer than 300,000 units in 2001 to more than 900,000 in 2005. Ford, Hyundai, Honda, Toyota and Renault have all seen significant growth in the country.

Tofas, one of the largest Turkish OEMs, has the biggest automotive R&D unit in the car industry there. It has recently worked with Fiat in a 50-50 joint venture to develop the Linea. The car will be built in Bursa, just 200km from Istanbul, for a number of European markets.

“Turkey is an important local market,” says Harald Wester, chief of engineering and design for Fiat. “Its location is very close to Europe and it may eventually be integrated into the European community. It has significant automotive industry background and know-how.”

Although the car is based on the Punto, the Linea was developed at the Bursa plant, allowing Fiat to understand potential problems right from the design stage. The site also has facilities for die construction. “All the prototypes are produced by people who come from manufacturing,” says plant director Massimo Risi.

The engineers are almost exclusively Turkish, and current skill levels are expected to increase. “We’re working on the level of engineering,” says Wester. “In prototyping, testing and technical sign-off, particularly in the industrialisation phase, the competence of local engineering capacity will continue to grow.”

In the past five years, the Turkish government has made policy changes to increase funding for R&D, and this has provided a big advantage to the industry. It has also helped to strengthen relationships between industry and academia.

“There is a central funding institute, like the US’s National Science Fund, which is almost begging for projects,” says Professor Emre Kose, head of the graduate programme in automotive engineering at Istanbul’s Bogazici University. “It has a lot of funding, but is still looking for applications.”

Kose says more opportunities than ever before in the automotive industry are being taken up by engineering graduates. “The students are extremely qualified,” he says. “The ratio of real engineering jobs has changed over the years, with more than half of graduates now going into the automotive industry.”

Less than two decades ago, almost a quarter of engineering graduates would end up in banking or finance-related jobs. Then Turkey’s financial crises in 1994 and 2001 meant huge numbers of people in these sectors faced unemployment. The knock-on effect was a return to more hardcore engineering that has continued and expanded to the present day.

Bogazici’s automotive engineering degree courses came about as local production increased in Turkey, manufacturing grew more sophisticated, and companies such as Ford needed more advanced local knowledge. The formal background, control and engine principles existed in the university, and a specific programme was devised to teach further classes evenings and weekends.

“If you have real engineering skills and are working in research and development, then you are virtually indispensable,” says Kose. “Most of our students are recruited before they graduate.”
This is borne out by Fiat. “We had a significant integration of Turkish engineers in development,” says Risi. “We took people from manufacturing, created a group and then used this group to train other staff. For the Linea, this meant we understood what to do on the line to avoid mistakes.

“In the very early stages, these are far easier to catch, and this is made much easier if the people who are producing the prototypes are the people designing the production cycles.”

The chances of finding research and development jobs in Turkey have increased hugely for qualified graduates in recent years. “With more and more companies shipping not only their production facilities but also their research to Turkey, it is becoming an automotive base for Europe,” says Kose.

“If you look at the numbers of vehicles that are manufactured here, it’s growing rapidly, especially in the past 10 years. It’s true that labour is cheaper than in central Europe, but it’s not just a matter of labour. It’s a dynamic market with qualified engineers wanting to do things.”

This is an aspect of the workforce that Fiat emphasises too. “People’s participation in Bursa is excellent,” says Risi. “The people I work with explain problems, how they want to solve them and what their ideas are.”

Competition for Turkey comes from eastern Europe. “People in Turkey aren’t worried about India or China,” says Kose. “They are more worried about jobs being taken up by Romania or Poland.” But while wages are comparable at present, the cost of labour in EU countries is rising above inflation rates – something Turkey is not experiencing.

There are no expectations that Turkey will join the EU in the near future, so it is likely labour costs will remain lower, although its associate status with the EU still affords it free market access.

“The quality of the engineering here is better, too,” says Kose. “Eastern European countries, having been under communist rule, have a different attitude to engineering and economics. Turkey is more manageable for European companies.”

Turkey occupies an interesting position in the global automotive market, then. It does not have the most advanced engineering skills base, nor are wages the lowest. Its geographical position does not make it ideally placed to supply to other countries inside or outside the EU.

But Turkey’s balance of these factors is unique, making it a very able all-rounder and with flexiblity. Combined with its huge potential for growth as a market, this could make it an area to watch closely.