Passenger car emissions in Turkey
This paper analyzes the Turkish passenger car market and the effect of the existing tax system on both vehicles on the road and newly registered cars. It outlines the most recent developments in the Turkish passenger car market and creates a basis for further research on optimizing the tax system.
Passenger car taxes in Turkey are higher than in almost all of Europe. The largest portion comes from the vehicle registration tax (ÖTV), which is tied to engine size, or displacement. The tax nearly doubles for engine displacement above 1,600 cm3 and triples for engine displacement above 2,000 cm3. As a result, consumers overwhelmingly purchase new cars with smaller engines. Ninety percent of vehicles on the road have an engine displacement below 1,600 cm3 and almost no vehicles have an engine displacement above 2,000 cm3. However, the average CO2 emission levels of new cars in Turkey since 2015 have equaled or have been slightly higher than those in the EU.
There are some tax incentives for hybrid-electric and battery-electric vehicles, but these cars account for less than 1% of new sales in Turkey. At the same time, hybrid and electric vehicles have reached almost 5% of the market share in the European Union.
Tax incentives in Turkey favor older, higher-emission cars. The annual ownership tax (MTV) is lower for older cars, which encourages owners to keep their vehicles as long as possible, even though the vehicles tend to have high emission levels. Passenger cars older than 16 years produce about 40% of the total CO2 and 67% of the total nitrogen oxide (NOx) emissions in Turkey, but contribute less than 10% to the total MTV revenue.
Going forward, the Turkish government should consider reforming the ÖTV and MTV system for passenger cars. An emissions-based structure that encourages consumers to buy more fuel-efficient cars would help reduce the country’s CO2 emissions, fuel consumption, and dependence on oil imports. Moreover, it would help secure the long-term competitiveness of the Turkish automotive industry at a time when conventional combustion engine vehicles are losing popularity in the EU, the main export destination of Turkish car manufacturers.