The Expanded and Intensive Trade in Turkey's Automotive Sector

Introduction

The automotive industry in Turkey is a sector that has an important place in the manufacturing industry and is in close relationship with other sectors. Since goods produced in many sectors, especially iron and steel, petrochemicals, and textiles, are used in vehicle production, the automotive industry is in close cooperation with many supplier companies. This cooperation also ensures that supplier companies use new technologies and that their production is carried out effectively and efficiently. On the other hand, the fact that the automotive industry provides the production of vehicles needed by many sectors, such as tourism, transportation, construction, and agriculture, has caused this sector to affect the entire country's economy. Moreover, the automotive industry contributes greatly to increasing employment both in its own field and in the areas where its suppliers operate.

Foreign producers in our country are looking for new markets for exports, and investment incentives are given to these producers, which has enabled foreign investors to invest in Turkey. Automotive production and exports increased with the investments made. Today, automotive sector exports constitute approximately 12% of Turkey’s total exports (TURKSTAT, 2021). The production capacity and exports of the automotive industry, which was established in Turkey in the early 1960s, have constantly increased over time. As shown in Figures 1 and 2, in the period from 2002 through 2020, automotive main industry exports increased from $2.415 billion to $16.269 billion, and automotive sub-industry exports increased from $1.748 billion to $9.344 billion (TURKSTAT, 2021).

Figure 1.

Major automotive industry export (In terms of $million)

Note. Turkish Statistical Institute, official webpage, 2021.

Figure 2.

Automotive sub-industry exports (Figures are in $million)

Note. Turkish Statistical Institute, official webpage, 2021.

It is of great importance to determine whether the export increase in the automotive sector, which has such an important place in our country's economy, is a healthy increase. In this study, the sources of the increase in automotive sector exports for the period 2002 through 2020 are analyzed by calculating widespread and intensive trade, with the aim of determining whether the increase in exports in the automotive sector is a healthy increase.

Literature Review

Many studies have been carried out in international economics scholarship attempting to reveal the reasons for the increase in exports. In this section, studies examining export growth in terms of extensive trade and intensive trade will be evaluated.

In the study conducted by Armington (1969), a general demand theory was used for products, determined by considering both their types and production locations. According to traditional international trade theories, increasing production is sufficient to increase exports. Moreover, according to traditional theory, the goods produced are homogeneous. However, since the goods subject to foreign trade are not homogeneous in reality, new theories had to be developed. The first theory developed on this subject is the horizontal intra-industry trade theory developed by Krugman. Krugman (1979) stated that the change in trade was due to economies of scale rather than changes in factor endowments and technology. Accordingly, the market has the characteristics of monopolistic competition, and although the prices of the goods produced are the same, there are differences between the goods. The increase in exports was based on increasing product diversity.