Turkish car sales slump, underscoring economic slowdown

Turkish car and light commercial vehicle sales slumped in June from a year ago, in perhaps the starkest example of how a slide in the lira and higher interest rates have impacted the economy.

Sales of the commercial vehicles sank 44 percent from June 2017 to 9,912 units, the Automotive Distributors Association said on Tuesday. Car sales fell 38 percent to 41.225 units, it said.

The lira has fallen about 20 percent against the dollar this year, paring demand for imported vehicles whose price alters according to exchange rate fluctuations. The lira’s decline forced the central bank to increase interest rates by 425 basis points to 17.75 percent in May and June, prompting banks to raise their own rates on car loans to more than 20 percent.

The slump in sales in June was more than three times the 11.9 percent decrease for the first six months of the year, the data showed.

President Recep Tayyip Erdogan’s government won twin presidential and parliamentary elections on June 24 pledging to continue with a program of economic growth and to tackle inflation. Erdogan has yet to announce his new economic team, expected to be based in committees tied to the presidential palace, rather than at ministries. The change in economic management comes after Erdogan gained increased powers at the election, which followed a public referendum on the role of the presidency in April last year.

The decline in car sales followed preliminary data for the trade balance on Monday, which showed imports and exports declining in June, with imports falling at a faster pace of a yearly 8.9 percent.

Inflation surged to 15.4 percent in June, the highest rate since 2003, from 12.2 percent in May as the lira’s decline impacted prices. The data may force the central bank into another rate increase, further paring demand for goods such as cars.