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Abu Dhabi, UAETuesday 23 October 2018

Tesla's plans for Turkey in spotlight as currency falls and sanctions bite

But fate of US pastor, due in court on Friday, could see trade war with US ease and difficulties retreat for electric car maker

Tesla chief executive Elon Musk is keen to make firm's presence felt in Turkey. Reuters
Tesla chief executive Elon Musk is keen to make firm's presence felt in Turkey. Reuters

Istanbul // Tesla founder and CEO Elon Musk is a big fan of Turkey.

In May, the billionaire South African announced plans to launch Tesla there by the end of the year. "Love your country and will be there in person," he posted on Twitter. Although Tesla representatives say details on upcoming executive trips to Turkey are not available, Mr Musk may visit while taking in a summit on satellites scheduled for November 1-3 in Istanbul.

Much has changed in the months since Mr Musk's announcement, however. Embroiled in a nascent trade war, the Turkish government in August raised taxes on US-made cars to 120 per cent in response to similar moves by Washington meant to punish Turkey for detaining Andrew Brunson, an American pastor and long-time Turkey resident. Since Mr Musk's announcement in May, the value of the Turkish lira against the US dollar has fallen by 30 per cent, increasing the cost of imports, including Tesla electric cars.

On the surface, Turkey appears to be a market ripe for electric vehicle (EVs) penetration. It already boasts a major car manufacturing industry that employs thousands of skilled workers. It is almost completely dependent on imports of petrol and diesel, which have become increasingly expensive for motorists with the lira diving by 40 per cent against international currencies this year alone. Developing EVs to make Turkey less dependent on foreign energy has been a long-term goal for President Recep Tayyip Erdogan. As such, an alternative source of running its 12 million-strong vehicle fleet, such as Tesla's battery-powered cars, ought to be hugely attractive.

But recent trade conflicts have seen car sales overall decline in the country.

bz1010 car sales
Trade conflict has hit vehicle sales

And the political impasse may have damaged Mr Musk's plans. "Because of the trade war there's been a 120 per cent tax on American goods, so if you buy a Tesla, the price is double, then you add tax and on top of that there's 18 per cent VAT," says Cem Gunal, a Tesla S model owner based in Istanbul. All combined, it's a huge sum that's moved Teslas beyond the financial reach of many living in Turkey. This follows Tesla's banning its mobile service technicians from travelling to customers in Turkey following the failed coup by a section of the country's military in July, 2016.

Despite the political wrangling, Mr Musk and Tesla enjoy a cult-like following in Turkey. The CEO's Instagram post from Ataturk's mausoleum in Ankara in November received more than a million likes – more than any other the entrepreneur ever posted on the site. "I usually buy cars that are rare, and my idea was to drive my SUV during the week and keep the Tesla for weekends," says Mr Gunal, a partner at a data protection firm in Istanbul who bought his first Tesla in 2015. "But I soon found that I was in the Tesla all the time." The performance of the Tesla Model S P85D he drives has been described by TechCrunch, a news site, as "absolutely insane".

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Mr Gunal is a member of TeslaTurk, a group of around a hundred Turkish Tesla owners and fans. "There were two Teslas in Turkey at the beginning of 2015," says 26-year-old Emir Tunçyürek, the group's founder. "Now, there are between 350 and 400. We started a WhatsApp group, so Tesla owners could keep in touch." Mr Tunçyürek says he recruited Mr Gunal to the group when he saw the Model S parked outside a grocery store in Istanbul. Mr Tunçyürek, whose first exposure to EVs came while studying in San Francisco five years ago, was behind a stunt encouraging Mr Musk to visit Turkey by offering him free kebabs on Twitter last November. Mr Musk replied, saying "thanks".

Turkish President Recep Tayyip Erdogan (L) speaks with the founder of US aerospace manufacturer and space transport services company SpaceX, Elon Musk during a meeting in Ankara on November 8, 2017, as they stand next to models of SpaceX rockets. / AFP PHOTO / STR
Turkish President Recep Tayyip Erdogan (L) meets Elon Musk. AFP

A consultant on EVs who supplies charging accessories to Turkish owners of all electric models, Mr Tunçyürek says the disincentives for buying regular cars are many. Engines of 2 litres and larger are subjected to 160 per cent tax at import. EVs are also relieved from an additional biannual tax that can run as high as $6,000 for high-end fuel-burning cars. On top of that, although purchases of regular vehicles are taxed at 60 to 160 per cent of the car's base price, the rate for EVs ranges from just 3 to 15 per cent.

Experts say the low number of Teslas on the road in Turkey is partly due to the dearth of charging facilities and broader infrastructure that means cars must be sent to Europe for maintenance and repair work. Because there are no superchargers in Turkey, some owners suggest driving in the slipstream of trucks and buses on motorways to cut down on battery use.

"The problem we have right now is that we don't have enough electric cars being sold," says Mr Tunçyürek, who admits he's always been a tech aficionado rather than a car nut, "so the distributors and car sales teams don't think highly of EVs". He says several domestic Turkish ventures are producing EV chargers of their own. "So, it's becoming competitive and it's growing." Currently, only two EV models – the BMW i3 and the Renault Zoe – are available for sale in Turkey. "Charging infrastructure is an issue, but sales companies need to promote them, too."

Mr Musk's marijuana-smoking antics on a popular podcast last month saw a municipality in western Turkey revoke its offer for Tesla to build 180 electric buses and associated infrastructure, although whether this would in any way deter him from entering the Turkish market is debatable.

That Mr Musk travelled all the way to Turkey for a 24-hour visit last November suggests the feels it's a country worth his time on a number of fronts. In June, Turkish media reported that Tesla had advertised jobs at Istanbul's upmarket Zorlu Centre mall while, according to reports, Mr Musk's SpaceX is a subcontractor in a contract signed last year between Turkey and Airbus to deploy satellites.

With Mr Brunson's next court hearing scheduled for Friday and his release an increasing possibility as Ankara seeks to heal relations with Washington, the politics that have so far held up Tesla's entry to the Turkish market may soon pass.