POTENTIAL TO DO BUSINESS

TURKISH AUTOMOTIVE INDUSTRY POTENTIAL TO DO BUSINESS Ahmet Bayraktar Vice President TAYSAD ASSOCIATION OF AUTOMOTIVE PARTS & COMPONENTS MANUFACTURERS IN TURKEY

Turkey ID Card Surface 814,000 Km 2 1,565 Km Max. Length, 680 Km Average Width Population: 72 Million (2004), Est. 85 Million by 2025 Average Population Increase: 1.5 % (1999/2003) 3.500 US$ GNP Per Capita (2004) 6.500 US$ Purchasing Power (2004) % 5 Real GNP Growth Rate (2004) Inflation 12 % (2004 Full Year) ( 68 % in 2001 ) Car Density: 86 P.Cars per 1.000 Inhabitants (2004)

Turkey is Active in Regional and International Organisations In The Western Front An Active and Charter Member of UN and its Agencies A Member of NATO, Council of Europe, OECD, World Bank, IMF, WTO An Associate Member of the EU and in Customs Union With the EU, Candidate for Full Membership In The Eastern Front A Member of Islamic Conference and Islamic Development Bank A Member of Economic Cooperation Organization and Black Sea Economic Cooperation Region

Turkey Keeps up With Recent Global Economic Trends in the Region Long Practice of Global Market Economy Emerging Economy Applying the International Rules of Free Trade Such as Competition Law, Property Rights And Etc. Country Where International Capital Movements are Liberalized Up to Date Infrastructure for Commercial and Financial Activities, Telecommunication and Transportation Competitive Industrial Products for the World Market

Turkish Automotive Industry LOCOMOTIVE Largest Exporter Leading Investor ECONOMICALLY STRATEGIC GNP Employment Level of Technology The automotive industry is one of the four locomotive, largest exporter, leading investor sectors of the Turkish economy, Considering its remarkable contribution to the national production and development, to direct and indirect employment, and to the level of technology, automotive industry in Turkey is now a crucially strategic sector on economical basis.

As a result of the Customs Union process initiated in 1996 new conditions were created in the market. Importing became more and more relaxed, the ground was set for extreme competition. Incentives have been provided to investments concerning the manufacturing of new and modern model vehicles. Technical cooperation was transformed into economic co operation as a result of increasing foreign capital shares.

Capacity and Production of Automotive Manufacturers 2004 December 2004 2004-12 Months Types Capacity Production Capacity Production Pass.Car 64.667 33.967 776.004 447.152 Truck 5.088 3.043 61.056 31.790 Pickup 15.888 30.545 190.656 301.563 Bus 588 417 7.056 4.839 Minibus 5.702 2.333 68.424 28.161 Midibus 1.295 730 15.540 9.903 F.Tractor 5.417 1.810 65.004 38.627 Total 98.645 72.845 1.183.740 862.035 Source:OSD

MVI Integration ( 2004 ) Link with EU Manufacturers Link with Non - EU Manufacturers Fiat Group JV Isuzu JV Ford JV Toyota F MAN F Honda F Mercedes Benz JV Hyundai JV Renault JV Mitsubishi L Iveco JV F = Foreign Rover Group L JV = Joint Venture Peugeot L L = License

85 % of Components Manufacturers Automotive Manufacturers in Turkey TOSB TAYSAD Organized Industrial Zone ISTANBUL Gölcük Izmit Adapazarı Bursa Eskişehir Ankara TURKEY TTF Izmir Konya Aksaray Antalya Adana Temsa Tümosan 6

Passenger Cars Production BRANDS 2000 2003 2004 HONDA 9.821 11.000 15.581 HYUNDAI 19.967 14.000 29.277 OPEL 7.039 - - RENAULT 140.159 132.000 197.353 FIAT 105.775 66.000 70.564 TOYOTA 14.715 71.000 134.377 TOTAL 297.476 294.000 447.152

Commercial Vehicles Production BRANDS 2000 2003 2004 ISUZU - AOS 8.313 4.000 6.011 ASKAM 6.382 1.800 1.878 BMC 11.387 9.900 12.819 FORD - OTOSAN 21.098 115.000 206.760 HYUNDAI - ASSAN 11.707 21.800 28.643 PEUGEOT - KARSAN 19.355 8.300 16.885 MAN 1.671 1.950 1.986 MERCEDES BENZ M.B.T. 6.447 6.800 11.686 LAND ROVER - OTOKAR 4.076 2.500 3.245 IVECO - OTOYOL 8.348 4.400 4.723 MISTSUBISHI - TEMSA 5.323 2.600 6.316 FIAT - TOFAŞ 9.397 62.000 75.484 TOTAL 113.504 241.050 376.436

In the 2000s, the Turkish automotive industry exhibits characteristics of an industry focusing on exporting. In 2004 with more than 10 billion $ it ranked as the second exporter er industry in the economy.

Automotive Exports ( USD Million ) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2004 2005 2005/2004 SECTOR Total Total Total Total Total Total Total Total Total Total Jan-Feb Jan- Feb % Total CBU 463 565 389 414 1.052 1.043 1.722 2.441 4.128 6.974 783 1.257 60% * Passenger Cars 272 256 119 137 712 621 979 1.304 2.249 3.943 444 634 43% * Bus 130 199 189 167 213 233 267 305 478 510 82 62-24% * Others 61 110 81 110 127 189 476 832 1.401 2.520 257 561 118% Total Parts 723 809 915 1.079 1.185 1.339 1.681 1.901 2.390 3.046 428 551 29% Total 1.186 1.374 1.304 1.493 2.237 2.382 3.403 4.342 6.518 10.020 1.211 1.808 49% Source: U.I.B.

Exports destine to more than 170 countries Non EU 30% EU Share 70 % Germany 23% Other EU 10% Italy 12% Spain 2% Belgium 3% U.K. 6% France 14%

Export Targets for Turkish Automotive Industry In 2006 : 14.0 billion $ In 2009 : 18.0 billion $ Number 1 exporting industry in the economy

Nowadays, the shape and structure of Turkish automotive industry is changing. Foreign partners have begun to see the facilities that Turkey offers as their production center for their global markets.

In the very near future, Turkey will be ; The center of manufacturing passenger cars and commercial vehicles, and An alternative suppliers center for the global manufacturers. When investments for export oriented vehicles fully completed, Turkey will have come to a point where she will be able to export over 1.000.000.000 vehicles annually.

Due to the high export potential and Turkey s regional advantages, foreign capital has been showing an increasing interest in the automotive suppliers industry in Turkey. For instance, after Toyota s new investment project, new Japanese part manufacturing companies decided to invest in Turkey ( TOSB Area ) as well as bringing new business opportunities for local manufacturers. As of 2003 and with European Union companies pulling the lead, there are 185 foreign company partnerships in the industry. Some of well-known spare part manufacturers Autoliv Grammer Toyoda Iron Works Magneti Marelli Delphi Mannesmann Sachs Robert Bosch Volkswagen Hp Chemie Pelzer AE Goetze Lucas Rieter Hayes Lemmerz Yazaki Monroe Exide Europe Denso Lear Corporation Takashimaya N.Kagyo Sango Valeo Takata Petri Koito

Almost all components are produced in Turkey Casting Forging Engines - transmissions Power-train parts Electrical equipment Brake and clutch parts Hydraulic & pneumatic systems Body panels Wheels Mirrors Brakes Radiators Filters Springs Chassis frame and parts Seating & inner trimming & safety components Suspension systems Fixings Various plastics parts Various aluminium parts Batteries Auto glasses Wiper systems Brakes Lights - plastics & Filaments

The opportunities for the foreign investors in Turkish automotive suppliers industry 1. Establishing production companies for producing parts and assemblies and also raw materials which are imported in existing situation. 2. Moving the production of parts and components to Turkey to produce at lower cost, get more profit and to be competitive in global market. 3. Establishing JV with the appropriate Turkish partner who is doing the same type of production like you. 4. To establish service companies which maybe involved in, a) Research and development, b) Designing, c) Logistics, 5. To establish testing centers, 6. To establish tool making companies, 7. To establish trading companies to sell raw materials from stock to first and second tier suppliers.

Establishing Production Companies or JV For Parts and Raw Materials Airbags and safety systems, Polyethylene foam, Polypropylene foam ( EPP ) Special fabrics and cloths used interiors, Electronics and diagnostics, Audio and navigation equipments, Forged metal parts, Duroplastic and thermoplastic felts for interior and exterior auto parts, Quality fiberboard for car interiors.

Possible Investments in Service Companies Research and Development Laboratories which can run developments on contract basis and benefit low engineering cost, Design studios which can make a design on contact basis by bringing experienced personnel when needed, Logistics companies are needed who can make JIT or sequence shipment from first tier suppliers.

Possible Investments in Test Centers Today each supplier spends duplicate money to make tests in his company, Furthermore sends samples to European test centers losing time and money CAN A TEST CENTER BE ESTABLISHED TO RUN SOME OF THESE TESTS AND ALSO ACT AS AN AGENT TO SEND THE SAMPLES TO THE APPROPRIATE LABORATORY ABROAD?

TOOL SHOPS Although tool prices in Turkey are half of the European tool makers due to low labor cost it is not easy to find sufficient number of qualified and experienced tool producers. Many plastic injection producers try to make their tools in house which make them to make useless investment. Especially for large trim parts tools there is no good tool maker.

TRADING COMPANIES Turkish first tier suppliers lose much of their competitiveness by importing necessary raw materials and keeping large stocks FORD / FIAT / REANAULT approved cloths for car interiors, FORD / FIAT / RENAULT approved sheet plastics, Quality steel, Sticking bands, tapes, Accessories, such as clips, springs etc used by the suppliers, Additives used in plastics

Turkey is the only country in its own region having already established a well-advanced automotive industry, and it has proven itself to be a successful one in exporting every kind of automotive products to EU countries. Therefore, the automotive industry is strategically important both for Turkish and foreign companies that will invest in Turkey, a country which provides More than 1.000.000 annual modern vehicles production capacity, Developed suppliers industry with the power to compete, Young, educated and motivated man - power, Entrepreneurs ambitious to succeed, Global multinational shareholders, Adopted legislation in line with the international rules of free trade within the context of customs union and WTO, Easy access to potential emerging markets, Competitive labour cost and culture of productivity.

Established in 1978, Only and most complete representative of the Turkish automotive suppliers industry, Member of CLEPA ( European Automotive Suppliers Association ) 185 member companies ( produce for OEM and export oriented ), TAYSAD Association of Automotive Parts & Components Manufacturers Excellent reference point for local and overseas companies for purchasing products and investments in Turkey, Members have close ties with major European component manufacturers ( joint ventures or licensing agreements ), Members reached international standards in production of components at competitive cost and quality.

TAYSAD Members Who Has JV (2003) TAYSAD MEMBER FOREIGN PARTNER COUNTRY Capital Share ( % ) ASSAN HANİL OTOMOTİV SAN. TİC. A.Ş. Hanil E Hwa Korea 40 AUTOLIV CANKOR OTOMOTİV SAN. VE TİC. A.Ş. Autoliv Sweden 100 BAMESA ÇELİK SERVİS SAN. VE TİC. A.Ş. Arcelor France 40 Bamesa Group Spain 60 BELTAN YEDEK PARÇA VE MAKİNA SAN. VE TİC. A.Ş. Vibracoustic Germany 25 BOSAL MİMAYSAN METAL İŞLEME SAN. VE TİC. A.Ş. Bosal Holding BV Belgium 72,5 BOSCH FREN SİSTEMLERİ SAN. VE TİC. A.Ş. Robert Bosch GmbH Germany 80 BOSCH SAN. VE TİC. A.Ş. Robert Bosch GmbH Germany 100 CEVHER DÖKÜM A.Ş. Teksid Italy 30 EGE FREN SAN. VE TİC. A.Ş. ArvinMeritor USA 49 FEDERAL MOGUL İZMİT PİSTON VE PİM ÜRETİM TES. A.Ş. Federal Mogul USA 42,5 FEDERAL MOGUL SAPANCA SEGMAN-GÖMLEK ÜRT.TES.A.Ş. Federal Mogul Michigan 50 HP PELZER PİMSA OTOMOTİV A.Ş. HP Chemie Pelzer GmbH Germany 51 İNCİ EXIDE AKÜ SAN. A.Ş. Exide Corp. USA 50 LUCAS ELEKTRİK SAN. VE TİC. A.Ş. Lucas Industries PLC UK 12 MAKO ELEKTRİK SAN. VE TİC. A.Ş. Magneti Marelli Spa I taly 43 MATAY OTOMOTİV YAN SAN. VE TİC. A.Ş. Magneti Marelli Spa I taly 28 MAYSAN MANDO OTOMOTİV PARÇA SAN. TİC. A.Ş. Mando Corp. Korea 50 MECAPLAST OTOMOTİV ÜRÜNLERİ SAN VE TİC. A.Ş. Mecaplast SAM Monaco 100 NURSAN ELEKTRİK DONANIM SAN. VE TİC. A.Ş. Valeo Electronics&Connective Systems France 40 ORTADOĞU RULMAN SAN. VE TİC. A.Ş. Germany 7 PİMSA POLİÜRETAN İMALAT SAN. VE TİC. A.Ş. HP Chemie Pelzer GmbH Germany 10 RESINEX BMY PLASTİK KİMYA SAN. VE TİC. A.Ş. Ravago Plastics Belgium 35 RÖZMAŞ CHUO OTOMOTİV YAY SANAYİ A.Ş. Chuo Spring Co. Ltd. Japan 50 RÖZMAŞ METAL SAN. VE TİC. A.Ş. Münevver Ceylan Özcan Germany 3 SACHS BELDESAN SÜSPANSİYON SİSTEMLERİ SAN.TİC. A.Ş. ZF Sachs AG Germany 50 SAİ AUTOMOTIVE POLİFLEKS SAN. TİC. A.Ş. Faurecia France 100 SANGO OTOMOTİV ÜRÜNLERİ SAN VE TİC. A.Ş. Sango Co Ltd Japan 100 TAKOSAN OTOMOBİL GÖSTERGELERİ SAN. VE TİC. A.Ş. Magneti Marelli Italy 2,5 TEKERSAN JANT SAN. A.Ş. Michelin Kronprinz Germany 20,1 TİRSAN LEMFÖRDER AKS MODÜLLERİ SAN. TİC. A.Ş. ZF Lemförder Germany TOYOTETSU OTOMOTİV PARÇ. ÜRETİM VE TİC. A.Ş. Toyoda Iron Works Japan 100 VALEO OTOM. SİSTEMLERİ END. A.Ş. Valeo France 100 ZATEL PRES DÖKÜM SAN. VE TİC. A.Ş. TMCI AG Switzerland 25 Dirilgen Holding AG Switzerland 8 ZF TÜRK SAN. VE TİC. A.Ş. ZF Friedrichshafen AG Germany 100

Production Others %35 TAYSAD Members % 65 OTHERS %30 Exports TAYSAD Members 70% 40.000 employees

The quality of TAYSAD members has reached international standards. Quality Certificates No of Companies ISO 9001 66 ISO 9002 63 DAIMLER - CHRYSLER OPEL FORD VW MERCEDES TOYOTA DAF IVECO GM VAUXHALL SAAB RENAULT FİAT DACIA LEYLAND TAYSAD members supplying to major overseas OEM companies QS 9000 44 ISO/TS 16949 47 Others (TUV,VDA,ISO,TSE 14000 etc.) 51 MF STEYR JOHN DEERE CATERPILLAR MACK TRUCKS DAEWOO ISUZU SAPCO BMW HONDA PEUGEOT PERKINS VOLVO IRAN KHODRO NISSAN

TAYSAD MEMBERS, WITH THEIR STRONG ABILITIES, ARE READY TO MAKE USE OF THE OPPORTUNITIES OF GLOBAL PRODUCTION If you are looking for ; a new market for growth, new sources to increase competitiveness, a place to make a profitable investment We maintain that TAYSAD Industrial Organized Zone is the RIGHT PLACE, and TAYSAD members are the RIGHT PARTNERS for you to choose.

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