Dear Stakeholders,

The year 2019 that we have left behind was a time when many unexpected developments on a global scale forced agenda changes. The positive political atmosphere that came as a result of improvements in the relations between the United States and North Korea was replaced during the year by serious geopolitical uncertainties and problems. Developments of a global scale such as economic volatility, major climate-related disasters, as well as migration and protest waves made us rethink how we do business and what we see for the future.

Just like with all other sectors, these uncertainties also had an impact on the automotive industry. Global passenger car and light commercial vehicle sales fell by 4.4% to hit 90.3 million in 2019, with sales contracting in all regions except Western Europe.

Among the topics that created problems recently for manufacturers in the automotive sector were changes in demand created by the fact that low-emission, environmentally friendly hybrid and electric vehicles attract more demand, as well as the commercial wars that took place in the automotive sector due to mergers and takeovers between brands.

Looking at Turkey, we see that the automotive sector began the year 2019 in the negative atmosphere that eclipsed the second half of 2018 due to reasons such as geopolitical and economic uncertainties, as well as the fact that the concept of a global economy was largely replaced by closed and protective approaches. Closing 2018 with a 35% contraction, the automobile and light commercial vehicle markets continued to feel the brunt of this negative atmosphere even more in the first half of the year 2019.

Under these unfavorable conditions, the sector found a lifeline through practices such as Special Income Tax / Value Added Tax support that continued until the end of June, the salvage discount that continued until the end of the year, the interest rate support given by state banks in order to throw their backing behind domestic production, as well as the stable currency policy and low interest practices.

Despite the uptick in the last quarter of the year provided by a discount in auto loan interest rates, production went down by 5.7% to hit 1,461,244 units, while exports shrank by 5% to reach 1,252,586. The total export value fell by 3.1% to reach USD 31.232 billion.

The automotive market as a whole contracted by 23%, limited to 491,909 units. Automobile sales went down by 20.4% with 387,256 units sold in 2019, while the light commercial vehicle market dipped by 31.8% with 91,804 units sold.

Today the automotive sector contributes 4-5% of the Gross Domestic Product, and employs more than 500 thousand people with its main industry, side industry, distributor network, authorized dealers, service points, and connected lines of business. For this reason, it is really important for the sector to get back on track and for the domestic market to rise in terms of benefits to the economy and employment. At this point, I believe that the domestic automobile will also make important contributions to the sector.

Despite these challenges, Doğuş Otomotiv continued to be one of Turkey’s leading automotive importers and distributors. One of the significant accomplishments of Doğuş Otomotiv in 2019 was the story of how our Audi brand surpassed its rivals and became the best-selling brand in the premium segment.

At the same time, 2019 was a year in which despite all the uncertainties in the automotive market we were able to secure significant cost advantages in both vehicle and spare parts logistics as a result of our effective cost management, as well as the studies we carried out with our suppliers for the purposes of improving efficiency. In addition, we reduced our stock costs by a considerable margin without compromising on spare parts availability, thanks to our strong stock management. As Doğuş Otomotiv, we ranked first in 2019 in terms of the "Spare Parts Availability" ratio among European Spare Parts Distribution Centers within the VW AG family.

We have also made great strides in the digitalization processes that we launched in the last quarter of 2018 in line with Doğuş Otomotiv’s long-term strategy and future vision. In that regard, we defined roles that are in keeping with a lean management structure for our colleagues, while also identifying collaboration methods that allowed the IT Technologies and business departments to communicate and work in a coordinated fashion. Digital transformation remains among one of our top priorities - and one in which we as Doğuş Otomotiv are making sure-footed progress. Moreover, in order to be well-prepared for the changing business models of the future, our new business development department started cooperating with entrepreneurs in 2019.

Throughout the year, our brands continued to deliver projects that are seen as the benchmark by our main manufacturing company. Our Volkswagen Commercial Vehicles brand was named "The Most Customer-Oriented Distributor" among Volkswagen Distributors all around the world, while our Audi Aftersales team ranked first in the Distributor Satisfaction Survey.

What is more, our Company was named the "Most Honorable Company" in the EMEA Region Management Team 2019 Survey held by the Institutional Investor Magazine, and our CFO, Kerem Talih, ranked third in the "Best CFO of the automotive Sector" category, and our Investor Relations Manager Müge Yücel ranked second in the category of "Best Investor Professional". Human Resources and Process Management General Manager Ela Kulunyar entered the group of "Most Effective 50 CHROs" curate by Fortune-DataExpert.

Milestones at Doğuş Otomotiv

As Doğuş Otomotiv, we overcame hurdles and challenges, but also experienced blissful moments during the year 2019. We celebrated enthusiastically the 25th anniversary of our company with our employees, business partners, stakeholders, and Authorized Dealer network. We were reminded once again of the values we have been building for the last 25 years, while at the same time sharing our expectations and goals for the future. At this moment, it was invaluable to remember our efforts for the last quarter of a century, and to appreciate once again the privilege of being in solidarity and being a family. Underlining our passion once again on the occasion of our 25th year, we had the opportunity to state our common hopes and goals for the future.

As we leave behind our 25th anniversary as Doğuş Otomotiv, our used car website DOD, Turkey’s first and largest corporate used car brand that reflects the innovative perspective of our company, celebrated its 20th anniversary, while our company’s only -and the sector’s longest-running- social responsibility platform, Traffic is Life!, commemorated its 15th anniversary. Focusing on the effects of growing mobility and technologies on our daily lives thanks to rampant urbanization, Traffic is Life! became the platform with the largest community in the social responsibility space thanks to its social media and digital instruments, which it uses actively in order to reach its target audience in an effective manner.

Sustainability

Our corporate sustainability efforts, which we launched in 2009 and turned into part and parcel of our corporate culture with the goal of becoming a model company in the world and Turkey that creates sustainable and innovative solutions of the highest caliber for our social and ecological stakeholders in the automotive value chain, have continued to gain strength each year over the last decade thanks to the comprehensive and pioneering steps we have taken. In that regard, on the matter of gender equality, which we place a huge premium on, we delivered the Young Women Development Project by cooperating with the Turkish Educational Foundation (TEV) in 2019. Again in 2019, 43% of our recruitments comprised female candidates. We updated our priorities within the framework of our sustainability strategy, and with a common perspective, we determined our 2025 goals in light of the United Nations Sustainable Development Goals.

We raised our Corporate Governance Compliance Rating to 96.50 (9.65 out of 10) by adopting the corporate governance principles of equality, fairness, transparency, accountability, and responsibility in all our activities. As a clear indicator of our determined approach to internalizing Corporate Governance Principles, we were awarded by "Women-Empowered Board of Directors" award by Sabancı University Corporate Governance Forum. This award, which reflects Doğuş Otomotiv’s serious commitment to this matter, was a great development that motivated us even more for taking the next steps.

Our expectations for 2020

In 2020, we expect the economy to start a new climb, thereby laying the groundwork for foreign investments and raising growth to targeted levels. We consider the economy’s turnaround and the 1% growth achieved in the last quarter of 2019 as a remarkable development, and we predict that growth will be much stronger in 2020. In parallel to this, we predict that the automotive sector will continue to be the locomotive of the Turkish economy, and the total market volume will reach around 600 thousand units. In short, we expect a year in which positive expectations will become real. Even though it is inevitable that economic indicators such as foreign currency, inflation and growth will change depending on major economic and political decisions and processes both at home and abroad, we believe that a strong monetary policy approach and powerful political coordination will gradually carry us to our goals.

As Doğuş Otomotiv, we will focus on the new year without losing one bit of our speed or energy, in accordance with our vision that always sets the standards, our goal of reaching operational excellence in our business processes, and our motivation to become a sectoral model in this regard. In the year 2020, which we have started with a fresh sense of enthusiasm, we aim to be the leader in many areas with our new products including electric vehicles, our digitalization process that continues on all fronts, and our entrepreneurial efforts.

Warm Regards,

Emir Ali Bilaloğlu
Chairman & CEO