Dear Stakeholders,
We have left an unprecedented year behind due to the coronavirus pandemic. The virus did not only become a health crisis, but has also affected the world economy. According to the IMF, the cost of the pandemic to the global economy will reach 28 trillion USD by 2025. While nearly 500 million people have lost their jobs in 2020, G20 countries spent more than 12 trillion USD to offset the effects of the pandemic.
Almost all industries have been adversely affected by the pandemic, with the exception of a few business lines. In almost every sector, production was interrupted due to disruption of the supply chain. The global automotive industry did not stay out of this equation. In Europe alone, the automotive market shrank by 23.6 percent in 2020. Moreover, 24.3 percent fewer cars and 18 percent fewer light commercial vehicles were sold in Europe compared to the previous year.
In addition to the difficulties in production during the year, there were major disruptions in the supply chain due to the different COVID-19 measures taken in different countries and even different regions. It will not be easy for the automotive supply chain, which has a very complex structure, to return to normal again.
I guess that this process will have significant effects on decision-making mechanisms in the automotive industry. The pandemic has indicated that cost should not be the only criterion when selecting the production locations in automotive as is the case in other sectors. Following the pandemic experience, it may be inevitable for the global automotive manufacturers to shift their production bases to reduce the sensitivity and fragility in their supply chains. In the selection of new locations, variables such as the proximity of that country to main markets, the logistics and health infrastructure, manpower and efficiency will come to the fore just as much as the cost advantage of the premises itself. I believe that this fact will create a serious advantage for our country. Since the automotive, white goods, textiles and several other sectors are well established in Turkey, and considering its educated work force, geopolitical situation, and the fact that it is closer to Europe with its business practices, I believe the weight of Turkey in the world will further increase in terms of industry and production in the medium term.
The automotive market in Turkey has grown despite the pandemic
In contrast to the developments in the world, Turkey has experienced the most active period in recent years in the new and second-hand vehicles market in 2020. Completing the year 2019 with a shrinking sales volume of 479,060 units, the automobile and light commercial vehicle market grew by 61.3 percent with sales of 772,788 units in 2020 despite the pandemic, thus exceeding the expectations. By the end of 2020, Turkey ranked sixth in the European automotive sales with an increase of 61.8 percent compared to the 2019. It also ranked sixth in car sales in Europe and fourth in European light commercial vehicle sales.
Demand postponements caused by the contraction of the automotive market in 2018 and 2019 undoubtedly played an important role in the market size of Turkey coming to this point. On the other hand, the increasing need for individual mobility due to the pandemic has led to an increase in demand in the automotive sector, including the second-hand market. However, despite the sharp rise in 2020, the size of the automotive sector in Turkey is still below the market average of 10 years. But I find the continuance of the rapid recovery of the automotive sector, which contributes to 4-5 percent of the country’s GDP and employs more than 500 thousand people with its main industry, sub-industry, distributors, authorized dealers, service points and related business lines, especially during the pandemic period more valuable.
As Doğuş Otomotiv, we are ready for the new normal!
Since the early days of the pandemic, in order to meet the urgent needs of both our customers’ and public services’ vehicles in every region of Turkey in a non-stop manner, the continuity of our field operations was of great importance. In this context, we have defined the processes regarding health and safety, operations, and risk management, and implemented all necessary measures in a way to include the entirety of our operations, primarily our employees, customers, distributors, and suppliers. In order to manage operations centrally, the analysis of critical processes and communication of activities were carried out by our Emergency Management team. The Occupational Health and Safety Boards, which convened in parallel with the pandemic announcement, followed the developments in the world and prepared the necessary risk maps. Emergency action plans were implemented immediately and all risk items were covered. In line with our transparent communication policy, our employees were regularly informed about those plans. In doing so, we had very few colleagues who got sick. Additionally, we established a 24/7 support line for our employees covering different services such as healthcare and psychological counseling.
At this point, I sincerely thank all members of the Doğuş Otomotiv family for the endless efforts they have shown, and especially to all my colleagues in the field who do not have the opportunity to work remotely due to their duties.
By reviewing all our business processes, we have made many improvements in terms of both health and efficiency, including our different stakeholders, along with our OEM, authorized dealers, service points and customers. Although we were ready in terms of technical infrastructure but we had not found the opportunity to try it before, we realized that the remote working model increased our efficiency exponentially. We moved our trainings and corporate internal activities to online platforms.
Global developments in both climate change and sustainable finance in 2020 revealed the importance of the private sector in creating a more sustainable world. In addition, issues such as demographic change, accelerating urbanization around the world, limited resources, and technological progress seem to be on the agenda of sustainability until 2030. These trends are predicted to have significant effects on the operations of all companies around the world and the behavior of consumers. Many companies are shaping their strategies and investments in order to exist in the future by analyzing these trends now. Being a company that has put sustainability at the center of its business strategy since 2009 as a strategic priority has been our greatest advantage in adapting to this rapid transformation required by the pandemic.
Doğuş Otomotiv’s understanding of effective risk management, which includes non-financial risks within the framework of the holistic risk management approach we have internalized, and our high adaptability to rapidly changing conditions owing to crisis plans we have created, enabled us to come out of this difficult process undamaged. By maintaining a consistent and meticulous compliance with corporate governance principles, we raised our rating to 9.67.
Our Digital Transformation strategy, which has been carried out at the General Directorate of our Company since 2017 and is among our priorities in the field of sustainability, is of vital importance to us. In the pandemic, we have clearly seen the benefit of the distance we have come along and the efforts we have paid with the aim of digitizing all our processes. We have created numerous projects and solution teams by designating alternative scenarios with our agile management approach, and we have achieved a total benefit worth 18 million with the projects completed in 2020. Therefore, our digital infrastructure, which we have successfully integrated into our business models, will be one of our most important competitive advantages in 2021. We will continue to invest in digital transformation in the coming years.
The innovations brought by the digital age not only affect the way we work, but also the expectations of the business world, and therefore the competencies we need. In 2020, we designed the Digital Competence Development Program to support these competencies and to support the dominance of our employees using basic and advanced technological applications. We included our employees at all levels in basic digital awareness and digital transformation training sessions. We also introduced new technologies and concepts through basic awareness video trainings for them. In addition, we have designed different training programs for the upcoming period to gain more comprehensive information on these technologies. Thus, we are realizing our “upskilling” plans by providing new skills to our colleagues from different functions in their digital transformation journey.
Our Doğuş Otomotiv Spare Parts and Logistics unit, which prioritizes the digitalization investments in order to create an effective and sustainable e-supply chain management (industry 4.0) and produces projects for the continuous improvement of the spare parts operating systems, increased their safety stock levels in a timely manner and with necessary amounts by evaluating the possibility of suppliers working with low capacity at the beginning of the pandemic process and by evaluating the risks that may be encountered in the part procurement process. By moving forward in coordination with our suppliers, we ensured the supply of orders with close follow-up and we met customer demands as quickly as possible. In addition, we have applied all the hygiene and social distance rules to our employees and to the employees of all our business partners that serve in our fields.
With the acceleration of e-commerce and digitalization during the pandemic process, which had profound effects on consumer habits and preferences in addition to its economic and social effects, we caught the trend of the changing market and fulfilled the demands and needs of our customers under the best conditions. We have ensured uninterrupted service using digital solutions to meet the needs of our customers.
While our automobile and light commercial vehicle sales figure reached 119,319 in 2020 with an increase of 48.8 percent compared to the previous year, our heavy commercial vehicle sales were realized at the level of 1,157 units with an increase of 148.8 percent. We attained a 15.4 percent retail market share in 2020 as our sales on all vehicles increased by 49.4 percent. In addition to their sales success, our brands continued their international success, which is referred to in service quality, in 2020. While numerous model debuts that we organized during the year have strongly supported our sales, our attack with the electric models continued with new vehicles. The Volkswagen Group, our main manufacturer, is taking firm steps towards becoming the global leader of an electric-based future with its effective electric vehicle policy, the platforms it develops, and a broad range of electric vehicles. The Group plans to invest 73 billion Euros in electric vehicles and digital technologies over the next five years. With an addition of 50 more models to the current 20 in production, we will have 70 fully electric models on the world’s roads by 2030.
In parallel with this goal, we will continue our electric car attack in Turkey, which we started with Taycan and meet the consumers with many models in the coming years. On the other hand, we continue to develop the charging station infrastructure where our customers can travel uninterruptedly with their electric vehicles. In this context, we completed the installation of 100 charging stations throughout Turkey with an investment of 7.8 million TRY, including Turkey’s fastest charging station with three charging units of 350 kW positioned at the Porsche Experience Center in Istanbul. At the same time, we started working by forming a committee to establish the Environmental Management System in 2020 for a sustainable future. We will continue our investments in this regard consistently in the upcoming period.
Much like 2020, 2021 seems to be an unpredictable year. In addition to issues such as the vaccine’s effect in preventing the pandemic, topics about the possibility of mutation or the 3rd wave, and geopolitical and economic fluctuations also bring uncertainties for 2021. In this period, when it is significantly important to understand the rapidly changing consumer sensitivities and expectations, it will be inevitable for automotive companies to reconsider their business models and to implement more creative, more flexible, and more efficient working methods for the sake of repairing the economic damage and sustainability.
Increasing individual mobility will increase the expectations from the automotive sector for a more qualified time spent on the road beyond driving comfort. While automotive manufacturers have to develop faster and more dynamic solutions to meet this expectation of customers and provide value-added services, data-connected services such as connection services, seasonal service applications, navigation, and software updates will create a brand new market. According to a study conducted by McKinsey & Company, the income generated by automotive companies from value-added services will exceed the revenues from after-sales services in 2030.
As Doğuş Otomotiv, we are making preparations for the post-COVID era by evaluating all possibilities. In this new period, as always, our primary priority will be to move forward by drawing lessons from the crisis, to work with a data-oriented and efficient approach, to adapt to new conditions with agility, and to leave our mark in a brand new era.
Sincerely,
Emir Ali Bilaloğlu
CEO & Chairman