Private consumption tax imposed on motor vehicles was cut as per a decision made on March 16. According to the March bulletin of Automotive Industrialists Foundation, decrease in the prices of automobiles and light trucks engine volume below 1600 cc as a result of this decision that will be in effect for three months is around 14 percent. The decision enables 1 to 6 % price reduction for the rest of vehicle types.

As you might remember, I had concerns in mind about the following aspects of the mentioned tax cut: Automotive sector exported the majority of the output. In 2008, the share of exported vehicles in total output of the sector and for total automobile production was 80 and 85 percent respectively. On the other hand, the decision had no benefit for automobile products exports. Therefore, it was not possible to create a significant impact on capacity utilization and production.

One could say a slight recovery in production tightening is still better than nothing. Then however, another question appeared in minds. If this sacrifice from the public budget was channelized to another area, would it have been possible to boom further the production level?

This was an appropriate question, as the story did not end here. More than that; more than half of the automotive products sold in domestic markets were imported. In 2008, share of imported vehicles in total number of vehicles sold in domestic markets was 56 percent - 68 percent in total number of automobiles sold in domestic markets. As a result, price reduction per vehicle sold in domestic markets enabled pushing budget capacity was to improve level of production in other nations rather than Turkey.

Please note that what I argue is in no means related to protectionism; because, the world as a whole loses if all states pursue protectionism. The point I emphasize is about deciding correctly where to best use the limited budget resources. Please also note it is not argued that the decision will have no impact on production level. To put it differently, the problem is that; we do not have ample resources. In what area you should use your limited resources to hurt your enemy most?

That the mentioned correct policy area is not a tax cut in automotive sector was so obvious that I conveyed related views just two days after the announcement of the decision. How, we have production and import figures for April. I believe that we can make a better assessment in the light of the figures.

Table 1 shows production and import figures for automobiles and light commercial vehicles (more than 95 percent is light trucks and the rest is minibuses) in the first four months of 2008 and 2009. As I stated above, highest rate of tax cut was introduced for these two types of vehicles. Impact of the crisis is not observable over the first four months of 2008. Figures are in line with 2007 production and import figures.

To eliminate seasonal changes and focus solely on the impacts of the said tax cut decision, it is necessary to compare each month with the previous month in the previous year. This is why the table gives percentage change figures.

I will make no comments on the table and figures. Please you evaluate the impacts of the use of limited resources.

Table 1: Production and import level for various vehicle types (unit)

This commentary was published in Radikal daily on 14.05.2009