Gasgoo News According to Bloomberg, the United StatesElectric vehicleMaker Tesla’s move to mitigate its decline in European sales through its growth in the Turkish market could be at risk due to Turkey’s unexpected increase in taxes on electric vehicles. As one of Tesla’s fastest-growing markets, Turkey recently announced an increase in the special consumption tax on the lowest level of electric vehicles.
Model Y； Image credit: Tesla
According to a presidential decree published in the Turkish Official Gazette, the country has raised the special excise tax on the lowest range of electric vehicles, including Tesla’s best-selling Model Y, from 10% to 25%. This move poses a new challenge for Tesla CEO Elon Musk. Musk has previously warned that Tesla could have a difficult year or more in the coming year due to the gradual elimination of subsidies for electric vehicles in the United States and slow progress in research and development of autonomous driving technology.
Turkey has become an increasingly important market for Tesla, helping to cushion the company’s decline in demand in other parts of Europe. During Tesla’s second-quarter earnings call on July 23, Musk specifically mentioned the Turkish market. According to the data, Tesla’s sales in Turkey surged 171% year-on-year to 7,235 units in June this year, with the Model Y becoming the best-selling electric model. Meanwhile, data released by the European Automobile Manufacturers Association (ACEA) on July 24 showed that Tesla’s registrations across Europe fell 23% year-on-year to 34,781 units in June.
Tesla’s success in Turkey was due to the Model Y model, which was designed specifically for the local market and would have met lower tax standards. Until then, Turkish consumers could enjoy a 10% tax rate and purchase the model for about 1.87 million Turkish lira (about $46,100). However, Turkey’s new tax policy could lead to an increase in the price of the model by about $6,000, an increase that could affect demand, especially as the tax standard for many internal combustion engine models remains largely unchanged.
This tax increase will not only affect Tesla but also a range of competitors who rely on the growing demand for electric vehicles in Turkey. It is reported that Chinese electric vehicle manufacturer BYD plans to start localized production in Turkey, and its models such as Dolphin, Atto 3 and Seal have enjoyed the same tax incentives in Turkey. Other global automakers, including Volkswagen Group, Hyundai Motor Company and Stellantis, are also selling affordable electric vehicles in Turkey that may be affected by the policy adjustment.
According to the official gazette released on July 24, in order to maintain the stability of the country’s currency, Turkey has adjusted the special consumption tax on some fossil fuel passenger cars and hybrid passenger cars. This reform involves changes in the tax base threshold and tax rate, and the specific adjustment range will be differentiated according to the engine type and displacement. Under the new regulations, the tax rate for fossil fuel vehicles will fluctuate between 70% and 220% depending on engine displacement, while the minimum tax rate for pure electric vehicles will be 25% and the minimum tax rate for hybrid vehicles will be 45%.
This policy change could have a significant impact on the overall development of the Turkish electric vehicle market, not only raising the threshold for consumers to purchase electric vehicles, but also changing the competitive landscape of various brands in the Turkish market. For Tesla, how to cope with the challenges posed by rising taxes while maintaining price competitiveness will be key to its continued success in the Turkish market.
