Dear Stakeholders,

The automotive sector made a cautious start to the year 2022, during which expectations for normalization in the aftermath of the pandemic had increased. The chaotic environment created by the pandemic within the commodity markets and supply chains continued to be felt in 2022. While production problems stemming from the chip crisis and raw material issues that were taken over from the previous year continued to exist in the automotive industry, recession expectations across the world and rising inflation changed the dynamics in the sector. The automotive industry entered a difficult period once again when the effects of the Russia-Ukraine crisis which broke out in February on mainly the energy and raw material prices were combined with the production and logistics problems.

While the increasing production costs caused an increase in automobile prices in Turkey, the sudden movements in exchange rates led to significant price fluctuations, especially in the second quarter. The difficulties faced by consumers in accessing reasonable loans, the expectations for a reduction in the special consumption tax that remained on the agenda throughout the year, and the regulation on the tax base that was announced towards the end of the year but failed to meet the sector’s expectations were the main factors that affected the outlook in the automotive industry in the year 2022. Despite such adversities, the fact that automobiles are seen as investment tools in Turkey ensured that the demand remained high.

Growth of the market led to a surge in demand for used vehicles

The number of automobile and light commercial vehicles sold reached 783,283 with a 6.2 percent increase from the previous year. The leading role in this increase was assumed by light commercial vehicles, whose market share grew by 8.6 percent. Despite the sale of 592,660 automobiles, which reflected a growth rate of 5.5 percent, the results fell short of expectations due to supply issues. Although the regulation on the tax base introduced in November increased vehicle sales partially, it failed to produce the expected effect in the markets due to supply problems and increased prices. The used vehicles market experienced significant price increases because of the bottleneck encountered in new vehicles.

Doğuş Otomotiv continues its success despite difficulties

As Doğuş Otomotiv, we have left behind a successful year in terms of finance, investments, and productivity despite the year 2022 being filled with difficulties caused by extraordinary developments in the world and their different reflections on the Turkish market. Although we had difficulties in catering to demands from time to time, we have preserved our leadership status among imported brands with a 13.3 percent market share at the end of the year 2022, thanks to the measures we adopted and our ability to rapidly adapt to changing circumstances.

One of the most remarkable successes of 2022 came with our brand CUPRA, which we introduced to the market in 2021. The CUPRA, which sold 2,792 units after a nine-fold increase in sales in the second year of its launch, clinched its success with ODMD’s ‘Fastest Growing Automotive Brand of the Year’ award.

The electric vehicle sector is rapidly growing

Significant developments took place in terms of electric mobility in 2022, including the launch of TOGG’s serial production. Switching to electric vehicles is one of the important processes regarding the future of our planet, which is under climate crisis threat. The regulations and incentives introduced in recent years towards sustainable mobility ensured that the sector entered a fast transition period in this area. In addition to the developments in demand, the day-by-day increase in the number of buyers who prefer electric vehicles gives hope for the future despite the road ahead of us being very long.

In 2022, a total of 7,733 electric automobiles were sold in Turkey. Hybrid automobile sales have reached a 10.9 percent market share with sales of 64,387 units. These numbers point to nearly a 30 percent growth in the hybrid automobile market and a 2.7-fold one in the electric automobile market compared to the year 2021.

The Volkswagen Group, which we are a distributor of, is among the manufacturers that invest the most in electric vehicles worldwide. We started to introduce the e-tron SUV, e-tron Sportback, e-tron GT, and RS e-tron GT models of Audi, which is getting prepared to market only electric models as of 2026, to Turkish consumers in the last months of the year. Volkswagen Commercial Vehicles’ fully electric new model ID. Buzz also took the road in 2022. We brought Porsche’s first electric vehicle, the Taycan, and its full model range to the market. These will be followed by other brands and models that we will be introducing to the market in 2023 and 2024.

We foresee that the increase in the number of electric vehicles will continue at an accelerated pace. For this reason, in 2022, we continued the investments we had initiated to provide charging and servicing to electric vehicles. We are offering more than 500 charging stations that serve Porsche and other electric automobiles to customers. Following the installation of Turkey’s fastest charging station with 320 kW power in 2021, we completed the installation of five charging stations with 350 kW power in Istanbul, Ankara, Bursa, Izmir, and Antalya in 2022. Moreover, we have opened Turkey’s first battery repair center in Doğuş Oto Kartal to serve electric vehicles. Our investments to increase the number of such centers are ongoing.

Our top priorities are sustainability and climate change

Being one of the first companies in Turkey to disclose policies on climate change, we had sustainability and climate change topics at the top of our agenda as we entered 2022. Extreme climate events that took place throughout the year showed us once again that we have no time to lose in the fight against climate change. While plenty of countries struggled against record-high temperatures and drought, especially during summer, countless people have lost their lives because of floods and landslides in other parts of the world. Falling insufficient against climate change is pointed to as the biggest global risk in the next 10 years in the World Economic Forum’s 2023 Global Risks Report. The report foresees that the effects of the events that would accelerate the ecosystem’s collapse and natural disasters would increase each year unless necessary measures are adopted.

On the other hand, legal regulations and investor expectations force companies to transform their business models and institutional structures into more sustainable models. Nowadays, companies are expected to adopt a more action-oriented approach by inclining towards environmental, social, and governance-based investments, as well as to assume a larger role in the solution of various threat factors from climate change to biodiversity, poverty, and the digital divide.

In light of these facts, as Doğuş Otomotiv, we deem our understanding of sustainability that is built on constant development, productivity, stakeholder engagement, and respect for the environment as a top priority for our company’s existence and growth in new areas. Considering sustainability a vital component of the strategic management model, we are constantly reviewing our business model and operations to be compatible with sustainability standards and the United Nations Sustainable Development Goals. As an example of our efforts in this direction, we have put the solar power plant that we installed with a $2.4 million investment on the roof of our Logistics Center in Şekerpınar to use in 2022. In this way, we aim to meet our annual energy needs from a renewable source and reduce our carbon emissions by 45 percent annually.

The investments we make in electric vehicles constitute one of the most important pillars of our efforts toward sustainability. In 2022, we received an Electric Vehicle Financing Loan worth €8.7 million within the scope of Combating Climate Change and Sustainable Financing to be used in the import of electric vehicles. In line with sustainability practices, we provide our suppliers and Authorized Dealers with consultancy and encourage them to share their environmental data. Another one of our achievements in 2022 was improving our compliance score on BIST’s Corporate Governance Principles Compliance Score Report to 9.74, up from 9.70 the previous year.

We make a difference with technology and digitalization

As part of digital transformation, which is one of the necessities of being a sustainable company today, through expanding the use of machine learning and artificial intelligence, we aim to become an organization that follows a data-based analytical approach, rapidly perceives changes and adapts to them, and develops new digital business models and implements them. We continue working for this goal, towards which we took our first step in 2017 via bringing the Digital Transformation Department to life, with process automation, programs towards improving our employees’ digital competencies, training, data analytics studies, and agile project management works.

To date, we have formed countless project and solution teams by creating alternative scenarios with an agile management understanding. Our progress in digital transformation processes has provided us with an important advantage in overcoming the pandemic’s negative effects and increased our IT software development outputs. While we completed 15 major software development projects in 2019, this number increased to nearly 70 in 2022. Today, where all products are similar to each other, we are closely following the developments in areas such as customer service management, call center management, and quality standards management with the understanding that technology and digital services are among the main factors in making a difference.

Improving our digital supply chain is also among our top priorities. With fully integrated systems, agile supply chains, advanced forecasting systems, and augmented reality applications in the supply chain, we invest in technologies that spearhead our sector in logistics. As Doğuş Otomotiv, we obtain more than 250 parts belonging to brands we represent from nine countries and 25 locations. Thanks to the advanced forecasting mechanisms that we use to manage an organization this size, we provide services that exceed the distribution centers in Europe by ensuring over a 99 percent availability for parts.

The digital infrastructure that we have successfully integrated into our business models will continue to be one of our most important competitive advantages in the upcoming period. We aim to increase and intensely continue our technology investments that gained even further importance with the pandemic with a focus on productization and data. The fact that the software investment budget we plan for 2023 is at 250 million TRY is an indicator of this approach.

The most valuable investment is the investment in people

The innovations brought about by the digital age not only affect the working styles but also the business world’s expectations, and hence the innovations that we need. In the automotive sector which necessitates its workers to constantly improve themselves due to its dynamics, digital literacy especially becomes important. For this reason, we make extensive efforts to prepare our human resources at all levels for digital transformation.

As part of the Digital Competency Development Program which we have developed to support our coworkers’ mastery of basic and advanced technological implementations, we organized pieces of training and webinars in areas such as RPA, Customer Experiences and Trends, and Digital Transformation in the Automotive Sector in 2022. While some 581 people attended the digital webinars, a total of 109 people attended the RPA and Customer Experience Improvement Program.

Supporting innovativeness within the company significantly contributes to the processes of constant learning and self-improvement. Doğuş Otomotiv and Doğuş Oto have made an income worth over 17 million TRY by bringing nearly 2,000 ideas suggested by its employees and more than 100 process improvement projects to life.

2023 will be the year where we continue to make breakthroughs despite hardships

Although making forecasts for 2023 is not easy, I believe that the postponed demand that continues to exist in Turkey will offer new opportunities to the industry. Under the current circumstances, the issue of supplying vehicles will continue to be significant in 2023 as well. We will continue to develop mutual solutions with producers and our Authorized Dealer organization for all of our brands in case the negative circumstances that affect the sector’s production and supply sides persist. On the other hand, the following couple of years will witness a spirited performance of the electric models of Doğuş Otomotiv brands.

In such a dynamic environment, I sincerely believe that we will leave behind another successful year thanks to the uninterrupted support of our stakeholders and the unwavering trust of our investors, as always, by maintaining our focus on issues such as digitalization, service-oriented work, operational efficiency, and optimum profitability.

Kind regards,

Emir Ali Bilaloğlu
CEO & Chairman