Esteemed shareholders and stakeholders:

The earthquakes that struck the Pazarcık district of Kahramanmaraş on February 6, 2023 caused tremendous loss of life in ten provinces. Our sadness as a country in the face of this disaster we are experiencing is indescribable. I wish God’s mercy on the souls of those who lost their lives in the earthquake and condolences for their relatives, and a speedy recovery to the injured.

At Tofaş, we mobilized and went to the greatest efforts to heal the wounds wrought by the disaster immediately after the earthquakes struck. Our Tofaş search and rescue team supported rescue efforts in the region. Aid materials collected with the support of our company and our employees and earmarked for those in need, reached the region with Tofaş trucks. We will continue to tailor our support for the disaster area according to the changing needs, in cooperation with the relevant organizations. I have no doubt that we will overcome these difficult days together and in solidarity.

Now, I would like to share with you my assessments of developments and of Tofaş’s operations in 2022.

Expectations that 2022 would be a year of recovery in the aftermath of the extraordinary global economic contraction brought on by the pandemic in 2020 and 2021 were dashed owing to problems arising from such adversities as global supply & demand, Russia’s war on Ukraine, and rampant cost-side inflation. However thanks to its experience, competencies, and ability to adapt to changing conditions, Tofaş confronted such challenges and once again successfully completed a year whose uncertainties put its resilience to the test.

FIAT’S FOURTH YEAR AS SECTOR LEADER

Despite materials procurement difficulties arising from chip shortages, structural agility and effective supply chain management ensured production continuity and product availability was even increased. Tofaş’s product line was expanded with new models, further strengthening its market position.

Tofaş’s 264 thousand production units corresponded to an 18.8% share of the Turkish automotive industry’s total output in 2022. 95% of home-market sales consisting of domestically-built vehicles defended long-term leadership on that front while the 123 thousand units that the company shipped abroad corresponded to a 12% share of all Turkish automotive industry exports. On the basis of its OHS, quality, and efficiency performance, the Tofaş plant is one of the two best in the entire Stellantis Production System according to a group-wide assessment.

Tofaş’s six-brand presence in Turkey’s automobile & light commercial vehicle market gave it a 19.2% market share with a total of 150,013 units sold. With total sales of 146,435 units and an 18.7% share of the passenger & LCV segment, Tofaş defended its standing as home-market leader for the fourth year in a row.

As a globally undertaken project bearing the Tofaş signature and with its unique place both in our own company’s history and in that of the Turkish automotive industry, the Egea’s success last year continued to make us proud. Egea was rated the most popular car in Turkey for the seventh year in a row in 2022, a year in which the line’s Sedan, Hatchback, Cross, and Cross Wagon body type and diesel & automatic and next-generation hybrid & automatic engine options went on sale for the first time. In addition to a record-breaking home-market sales performance, Fiat Egeas shipped to destinations around the world make a substantial contribution to Turkey’s automotive exports.

Besides defending its LCV market share in Turkey during 2022, late in the year Tofaş also introduced two new models in the midrange commercial vehicle segment: the Fiat Scudo and the Fiat Ulysse.

Tofaş’s Alfa Romeo and Maserati lines are both conspicuous among the fastest-growing automotive brands in Turkey. During 2022, Alfa Romeo’s compact SUV Tonale was introduced to the market with hybrid and diesel engine options.

Tofaş’s 2022 financial performance was also such as to support operational results last year. The company’s 2022 revenues were up by 121% year-on and amounted to TL 65,545 million (TL 65.5 billion) while its net profit was up by 160% and weighed in at TL 8.6 billion.

OUTSTANDING COMPETENCIES IN R&D AND TECHNOLOGY

In keeping with its vision of being a company that creates the best customer value, Tofaş continues to undertake investments that will carry it forward, with particular attention being given to R&D, technology, and mobility. Positioned in the global arena as a competitively-advanced product & technology development hub, the Tofaş R&D Center contributes to Turkey’s economy, industry, and R&D know-how by exporting engineering services while also developing entirely original products of its own and improving existing ones. Tofaş R&D enjoys a commanding position among the Stellantis Group’s R&D facilities by virtue of its product-engineering experience, more than 600 personnel, and the diverse inhouse capabilities of high-tech laboratories.

Tofaş is currently discussing and assessing new products, the continuation of Fiat Doblò production, and potential domestic-market collaboration and synergy opportunities with the Stellantis Group at Tofaş’s plant in the period ahead.

In an important initiative that got under way in 2022, the Tofaş R&D Center opened a product development & software branch in İzmir Institute of High Technology’s Technopark İzmir Software Center. This new venue in İzmir is intended to speed up the development of solutions addressing local needs by increasing the center’s automotive-industry software-production capabilities while also enabling Tofaş to better fulfill the responsibilities it is given in the design and development of components and systems, in virtual/physical verification processes, and in prototyping etc for Stellantis’s global ecosystem of brands and models.

Having increased the number of EU research projects on which it is working to 31 last year, the Tofaş R&D Center is currently working with more than 260 international project partners. Constantly increasing its involvement in the search for value-adding innovation, the center filed a total of 71 new patent applications during 2022.

Tofaş gives great importance to continuous learning and innovation both to ensure its sustainability as a company and to support the development of its employees. Tofaş regards digitalization and innovation as an ongoing journey of bringing about cultural change in every aspect of people’s lives. While working on intelligent-factory projects that make use of productivity-enhancing digital optimization, the company also taps into its digitalization and innovation competencies in the development of its sales and after-sales services processes so as to improve the customer experience. Such projects carry Tofaş forward of course but we also take pleasure in knowing that they also contribute to the growth and development of its sector.

With the introduction of Fiat Connect last year, Tofaş became the first automotive brand to bring the global phenomenon of connectivity technology to the Turkish market. Fiat Connect is now standard equipment on all Egea models. Developed in Turkey and the first connected-vehicle technology available in its vehicle class, Fiat Connect’s features and capabilities will be increased and expanded. The recognition that Fiat Connect has already attracted shows once again that Tofaş is on the right track in the area of vehicle connectivity.

Yet another significant development in 2022 was the formation of Koç Fiat Sigorta, an insurer and outstanding example of corporate intrapreneurship. The “Koç Fiat Sigorta” initiative that began as an agile-team project in line both with anticipated developments in customers’ automotive-industry expectations and with Tofaş’s own mobility priorities has been transformed into a Koç Fiat Credit subsidiary. Koç Fiat Sigorta will be providing whatever insurance products and services may be needed by any of its brands today and in the future both through Tofaş’s nationwide dealership network and through online channels in keeping with its vision of delivering end-to-end excellence in the customer experience.

INVESTING IN A BETTER FUTURE

Introducing new and constantly improving existing environmental, social, and corporate governance practices consistent with its approach of creating sustainable value and encouraging stakeholder engagement, Tofaş’s shares continue to be included in the Borsa İstanbul Sustainability Index.

Conducting all of its human resources processes and policies in line with the principles of inclusiveness, equality, and diversity, Tofaş prioritizes training and development programs that make its employees better prepared for the future. Through a variety of activities and projects, the company likewise continues to support the efforts of new graduates who will shape Tofaş’s future as they embark upon careers of their own.

Acknowledging the important role that social gender equality plays in a country’s economic and social progress, Tofaş believes that it should come up with long-term, concrete solutions for addressing this issue. Likewise recognizing the overlap in the two companies’ attitudes and approaches, Tofaş joined with its parent Koç Holding by becoming a member of the United Nations Technology & Innovation Action Coalition in 2022. Tofaş has committed itself to taking action to increase the number of female personnel with technology and innovation responsibilities and to encourage girls and women to pursue careers in technology and science.

Tofaş is aware of the urgent necessity of measures to deal with the increasingly more serious climate crisis and of taking action to reduce the environmental impact of all of its operations. As a corporate member of the Climate Initiatives Platform, Tofaş supports low-carbon economic transition. Having drawn up a comprehensive roadmap for this in 2022, the company has joined the UN Science-Based Targets Initiative. Tofaş intends to continue its efforts in this direction by resolutely advancing towards the realization of its ultimate goal of becoming a carbon-neutral business enterprise.

Committed to undertaking long-term projects capable of contributing to social progress, Tofaş continues its efforts to protect cultural heritage while also prioritizing investment in sport and education that contributes to the growth and development of new generations. It also continues to develop applications and solutions for inclusion in its Fiat Barrier-Free Movement, a program that was initiated to make it possible for drivers and passengers with reduced mobility to get around without being dependent on others.

ONWARD AND UPWARD

Tofaş will continue to acquire new and develop existing competencies to ensure the sustainability of its success. While creating added value for the national economy through its production and export operations, the company will likewise continue to invest in R&D, to support the wellbeing and development of its employees, and to further improve its environmental performance.

In closing, I thank our shareholders, employees, customers, dealers, and suppliers for being the chief architects of our success as well as all of our stakeholders for their continued support and contributions.

Very truly yours,

Cengiz Eroldu
Board Member & CEO