Chinese automotive giant BYD had planned to build a billion-dollar factory in Manisa, Turkey. The plant was due to start operations last year, but the construction is now in doubt. The Turkish authorities have announced that they will impose a financial penalty on the Chinese company. On top of that, BYD cars are selling increasingly poorly in the country.
The decline in sales of the Chinese electric car manufacturer in Turkey has proved to be one of the biggest surprises of recent months. The brand, which quickly conquered the market thanks to its technological edge and favourable price-to-quality ratio, has suddenly dropped out of the top spots in the sales rankings. Not long ago, demand was so high that customers were queuing up. Today, the statistics look completely different.
Why has the manufacturer’s popularity plummeted so sharply? An attempt to find an answer leads to an investment agreement signed in the summer of 2024 with the Turkish government. It is the implementation of this agreement – or rather the lack thereof – that triggered a domino effect, which is now reflected in sales figures. And soon, it may result in a huge financial penalty for BYD, imposed by the Turkish government.
Photo credit: BYD Europe
BYD’s billion-dollar factory in Turkey. Will the investment go ahead?
In July 2024, an agreement was signed regarding the construction of a factory near Manisa. The plan envisaged an investment worth $1 billion, the production of 150,000 cars a year and the employment of 5,000 people. The plant was to be built within a year and start production quickly. In return, the manufacturer received significant privileges: primarily tax breaks and an import quota for cars sold until production began.
The mechanism was simple. Turkey has for years supported manufacturers producing cars locally. Companies meeting specific conditions benefit from tax breaks and can import certain models on preferential terms. Upon signing the agreement, similar benefits were also granted to the Chinese manufacturer, but only until the factory started operations.
The problem is that the investment never got off the ground. Months have passed, and not even a symbolic ground-breaking ceremony has taken place at the construction site. The import quota has been exhausted, and the government has no intention of increasing it.
Sales are falling, tensions are rising. A hefty fine looms on the horizon
The lack of new import quotas quickly had an impact on the market. Cars that had previously reached customers thanks to preferential tax conditions were no longer available on that scale. The effect was immediate: a drop in sales and a loss of position in the rankings. The consequences, however, could go much further.
In the first days of April, a stir went through the Turkish media when journalist Fatih Altaylı revealed that the Turkish government was set to impose a financial penalty on BYD for failing to carry out its investment in Manisa. The fine is said to amount to the budget for the construction of the planned plant, i.e. as much as $1 billion.
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BYD denies the allegations. Have the Chinese authorities granted permission?
The manufacturer denies the allegations and points to the lack of approval from the Chinese authorities for the investment. According to the company, it is precisely the lack of final approval from Beijing that is blocking the start of construction. However, Osman Kıvırcık, a representative of the Manisa industrial zone, has issued an official statement contradicting BYD’s line. According to Kıvırcık, the Chinese firm had already received a building permit from the authorities in Shanghai.
The Turkish media speculate that the decision to abandon the investment in Manisa stems from BYD’s plans to open a similar factory in Szeged, Hungary. The investment in Hungary is set to be the Chinese firm’s main operational base in that part of the world. As a result, the plant in Manisa has been sidelined, and may even have been abandoned altogether.
From BYD’s perspective, production in Szeged appears to be of greater strategic importance, as it will grant the company access to the EU single market without the risk of changes in customs policy. But are the Chinese prepared to face a financial penalty from the Turkish government? We will likely learn more about the next chapters of this dispute in the coming months.
