New Car Sales Declining, Used Cars Recovering

Zero Car Sales Are Recovering As Second Hand Sales Drop
New Car Sales Declining, Used Cars Recovering

The second-hand sector, which passed the last year with a contraction, gives signals of recovery in the first quarter of 2022. Uğur Sakarya, Deputy General Manager of Doğan Trend Automotive Retail Operations and Suvmarket operating under Doğan Holding, evaluated the developments in the second-hand market and the new VAT regulation. Sakarya said, “While brand new automobile sales decreased by 34% in March compared to the previous year, the recovery in second-hand automobile sales continues. Although the official figures have not been announced yet, I can say that there were 40% more second-hand sales in March compared to February, and it was about 5% below last year. "Due to the increasing prices of new cars, the customers' turn to second hand, as well as the continuation of new car production and supply problems in many brands, helped the second hand market to recover faster," he said.

Due to the chip and raw material crises that continue all over the world, production lines continue to be disrupted and stopped. The supply problems experienced continue to affect the Turkish automotive industry as well. Vehicle availability problem is on the agenda as the most important problem of the new car market. Emphasizing that new automobile sales have declined in the light of all these developments, Doğan Trend Automotive Retail Operations and Suvmarket Deputy General Manager Uğur Sakarya said, “While brand new automobile sales fell 34% in March compared to the previous year, the recovery in used automobile sales continues. Although official figures have not been announced yet, it shows that sales were made about 40% more in March compared to February, and remained below 5% of last year. "Due to the increasing prices of new cars, the customers' orientation to the second hand, as well as the continuation of new car production and supply problems in many brands, allowed the second hand market to recover faster," he said.

“The SUV continues to rise”

Stating that the preferences of the consumers have changed significantly in the last period, Uğur Sakarya said, “When we evaluate it on a segment basis, we see that there is a tendency towards more economical B class cars from the C segment. However, we observe that the shift from sedans to SUVs continues and SUV models are on the rise. SUV has been growing steadily in recent years. The best-selling segment in recent months, according to ODD reports. All brands entered the new SUV model race. The second hand is also in great demand. Especially B-SUV and C-SUV vehicles attract great attention from all walks of life.

“VAT regulation is confusing”

Speaking about the VAT regulation, which has taken a heavy place on the agenda, Uğur Sakarya said, “As a result of the VAT regulation made as of April 1, 2022, VAT in the second hand vehicle trade was increased from 2% to 1%. Customers and companies are confused as there are different alternatives to second-hand trading, such as C18B (person-to-business), B2B (business-to-business), or companies' proprietary sales. To explain the subject in its simplest form; VAT paid by automotive companies, dealers and galleries on the profits they make when selling vehicles purchased from individuals through barter or cash purchase to another person or company was increased from 2% to 1%. Other than that, there was no change in the forms of trade. In other words, vehicles purchased with 18% VAT in companies will still be sold with 18% VAT. Vehicles that are the property of companies and purchased with 18% VAT will be sold with 1% VAT. The only open issue here is how to sell the vehicles that automobile dealers and dealerships buy from individual customers and then sell to a dealer or dealership by paying 1% VAT from the profits they make according to the new regulation. What should be done in order not to hinder the automotive trade and not to increase the prices of second-hand vehicles, is to sell such vehicles with 18% VAT on the total invoice amount, as in the past, without 18% VAT being applied for the second time. We have heard that there is a regulatory effort in this direction. I would like to add that second-hand vehicle sales from person to person are made only with notary sales, without any VAT payment, except for this regulation.

“There will be no negative impact on sales volume”

Emphasizing that the VAT update will affect the profitability of the dealers, but will not change the sales volume much, Sakarya said, “If we evaluate the effect of the VAT increase on the second-hand car prices and sales, I can say that it will not have a negative impact on the sales volume. Since the VAT regulation covers only the vehicles that dealers and galleries will buy from individual customers, I think that it will not have a significant effect on second-hand car prices. The profitability of companies that only trade in automotive will melt by 15% in these vehicles," he said.

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