Valued stakeholders,

In 2019 Tofaş strengthened its position in its sector, achieving impressive business results in both its manufacturing and domestic market operations despite increasingly tough market conditions owing both to global externalities and to the Turkish economy’s rebalancing processes.

Ranking amongst our country’s leading industrial concerns with 264 thousand vehicle units produced and 194 thousand exported in 2019, Tofaş continued to contribute to the national economy last year. Booking export revenues worth USD 2.3 billion and generating a foreign trade surplus of USD 919 million in 2019, Tofaş once again also demonstrated its commanding position in the Turkish automotive industry with domestic production accounting for 93% of its sales to its home market.

As the Turkish automobile and light commercial vehicle market representative of the Fiat, Fiat Professional, Alfa Romeo, Jeep, Ferrari, and Maserati brands, Tofaş’s market share increased by 5.7 percentage points to 16.4% last year.

THE DOMESTIC MARKET LEADER

With 76,251 units sold and controlling a 15.9% share of all automobiles and light commercial vehicles sold, Fiat brand rose to the position of market leader in 2019. The Fiat Egea Sedan, the preferred automobile of consumers since 2016, retained its leading market position for the fourth year in a row thanks to its 2019 sales performance with 52,206 units being sold. Sales of all members of the Fiat Egea family in 2019 amounted to 55,432 units. In the light commercial vehicle market, Fiat Professional ranked second as of year-end. In the minivan class, which makes up a substantial part of the LCV market, Tofaş’s Doblò and Fiorino models continued to lead the pack.

Alfa Romeo and Jeep sales remained steady in terms of volume and, given the diminished demand for imports, actually increased their market share.

Three new specially-designed versions of the Fiat Egea family’s hatchback and station wagon models with sportive equipment options were put on sale in 2019. As a result of a facelift investment to be undertaken for the Egea family, the Egea project’s termination date has been extended to 2024 and product-development work is currently in progress. Doblò, Egea, and Fiorino models have been brought into compliance with Euro 6d-TEMP emission standards and an LPG version has been added to the Fiorino line.

Last year the sixth millionth vehicle rolled off our plant’s assembly line. An important production milestone was also passed with the two millionth Fiat Doblò, a model which pioneered its own segment of the light commercial vehicle market.

Tofaş, established on the basis of more than 50 years of cooperation between Koç Holding and Fiat Chrysler Automobiles (FCA), has witnessed another milestone in 2019.

With the successful completion of negotiations between FCA and France’s PSA Group, it has been decided to merge the two into a new entity in which each side will control a 50% stake. In the period ahead we will be seeing the results of this agreement which we think will have positive results.

Turning now to our company’s financial performance in 2019, Tofaş’s revenues increased by 1.6% year-on-year and reached TL 18.9 billion. In the same period, net profit rose by 11.4% year-on-year to TL 1.5 billion.

THE LEADER IN WORLD CLASS MANUFACTURING

Tofaş strives to constantly improve the quality of all product and service processes throughout its value-creation chain and to generate more competitive advantage for itself through global-scale manufacturing. It achieves this by understanding customer expectations through a customer-centered approach.

Having introduced World Class Manufacturing (WCM) methodology employed in FCA plants around the world, in its own plant in 2006, in 2013 Tofaş became one of the first three FCA operations to be awarded “Gold” status. Continuing to push its production standards to even higher levels since then, in 2019 the company’s WCM score rose from 77 to 81, thereby positioning Tofaş ahead of any other automotives plant in the world where WCM is being employed.

AN ENDURING PIONEER IN R&D AND TECHNOLOGY

Celebrating its 25th year in 2019, the Tofaş R&D Center is one of Turkey’s and FCA’s leading R&D centers by virtue of the diversity of its knowledge and experience, its competencies, and its advanced laboratory and technology assets.

Our R&D strengths were augmented in 2019 with the commissioning of new testing capabilities at the center and by the acquisition of new product-development and production-technology competencies through research projects conducted both in-house and through university-industry collaborations. During 2019 the center worked intensively on improving and developing the company’s Fiorino, Doblò, and Egea models while continuing to provide support for FCA’s R&D projects as well. Feasibility studies for a project to develop a new Egea model were also completed last year and this project’s R&D work is now under way.

Until 2019, we invested more than EUR 58 million in our R&D Center for design and test infrastructure, and during the year, we also invested EUR 150 million in equipment to improve our competencies.

The total value of design and test infrastructure investments undertaken at the Tofaş R&D Center as of end-2019 was more than EUR 58 million. Last year we undertook EUR 150 million worth of investments in order to increase our competencies.

In the conduct of our ongoing digital-transformation efforts, we carried out projects and case studies to foster the competencies of our employees, improve infrastructure and databases in 2019. On the other hand, we have strengthened our cooperation in various projects with different stakeholders.

CONSTANTLY INVESTING IN PEOPLE

The importance that we give and the efforts that we expend on behalf of their development and motivation are measures of the value that we place in employing human resources who are committed to creativity and improvement and who are competitive in spirit. Tofaş Academy, which carries out our training and development operations, equips not just Tofaş employees but also dealership network, Customer Care Center, and supplier personnel with the knowledge and skills they need to be ready for the future. In order to further boost our strengths in this area, we inaugurated Tofaş Academy’s new campus and social facilities last year while also opening our new “Industrial Development School”, which will be supporting the field personnel.

Tofaş was chosen Turkey’s one of the best workplaces in an Aon Best Employers survey while Tofaş Academy received a total of seven awards (three gold, two silver, and two bronze) in the Stevie Awards for Great Employers and Stevie International Business Awards programs as well as gold and silver honors in two different categories in the Brandon Hall Excellence in Technology Awards program.

CONTRIBUTING SUSTAINABLY TO THE COUNTRY, THE ENVIRONMENT, AND THE COMMUNITY

When addressing sustainability issues, Tofaş takes a holistic approach that is mindful of the social, environmental, and economic dimensions of its actions and it strives to adhere to a management model that focuses on constant improvement and value-creation.

Having committed itself to sustainable-production principles, TOFAŞ also supports the transition to a low-carbon economy through its efforts to improve energy efficiency and is likewise a corporate member of the TUSİAD-REC Turkey Climate Platform. In 2019 Tofaş brought to 116 the number of its energy-efficiency projects, including those carried out as part of WCM Energy Management operations. Thanks to these projects, the company has conserved a total of 48,975 GJ of energy, thereby also reducing overall CO2 emissions by 3,959 tons. While Tofaş was on the B band in the Climate Change program, the rating score in the CDP Water program was B. In 2019 Tofaş remained one of only fifty companies in Turkey whose shares qualify for inclusion in the BIST Sustainability Index, a distinction that they have enjoyed for the last six years in a row.

Tofaş also continued to support and carry out long-term social responsibility projects that are beneficial both to the national economy and to social wellbeing in the areas of sport, education, and culture & art.

WORKING TOGETHER TO ACCOMPLISH MORE…

Tofaş seeks to achieve sustainable growth through a strong and leading position in the automotive industry by constantly expanding not only its production capabilities and technological clout but also the added value that it generates for its stakeholders.

Underlying all of Tofaş’s success however are its human resources–people who constantly and steadfastly strive to do their jobs better. The strength that it gets from its employees is what enables Tofaş to raise the bar by which that success is measured even higher. Constantly improving its performance, in 2020 Tofaş will continue to invest in R&D, technology, and human resources in order to ensure the sustainability of its success.

In closing I take this opportunity to extend my sincerest thanks to our shareholders, customers, employees, dealers, suppliers, and all other stakeholders for the support and contributions that make our success possible.

Very truly yours,

Cengiz Eroldu
Board Member & CEO