Sad to say, 2023 began with a dreadful tragedy that deeply distressed us all. The pain caused by the severe earthquakes that struck our country in February will never be forgotten. Since day one, Tofaş has been supporting relief efforts and doing everything it can to help address the needs of the disaster’s victims. Having established Umut Kent container cities, each capable of accommodating 20 thousand people, in earthquake-affected areas of five provinces, Koç Holding and Koç Group companies continue to support those affected by the disaster. In the Hatay, Adıyaman, and Malatya container cities we also opened Tofaş Basketball Schools whose aim is to give kids affected by the disaster access to sports and, even more importantly, to instill in them an ethos and outlook that will help them succeed in every aspect of life and not just on the playing field. As a company, Tofaş will continue its efforts to renormalize life for the disaster’s survivors and to create enduring value for them as well.
On a more positive note, 2023 was immensely significant for us all as the 100th anniversary of the founding of the Republic of Türkiye. We took great pride in celebrating the first centenary of the gift which Mustafa Kemal Atatürk bestowed on us all and which transformed our nation’s destiny forever.
Looking back at the global macroeconomic conditions of the year now behind us, what with efforts to restore price stability through tighter monetary policy and higher interest rates at home and with mounting geopolitical risks abroad, the road ahead in 2023 remained just as murky as it had been in 2022.
Though confronted by a competitive and dynamic automotive industry market in which change is being driven as much by challenging economic conditions as by technological advances, our company took steps that are crucially important to its future; it also achieved successful business results such that 2023 will be remembered as a significant year in its corporate history.
FIAT: BRAND LEADER FOR THE FIFTH YEAR IN A ROW
With a production run of 240 thousand units, Tofaş accounted for 16% of the Turkish automotive sector’s total output in 2023. The company also became the industry leader: 88% of home-market sales were of domestically-manufactured vehicles and 60 thousand units were shipped abroad. Tofaş also proudly passed an important milestone on its production odyssey with the manufacture of its 7 millionth vehicle.
Tofaş is positioned in the Turkish automobile and light commercial vehicle market with five brands, whose combined sales of 200,204 units gave it a 16.2% market share last year. The 193,622 units that our FIAT brand sold gave it a 15.7% passenger & LCV market share and clinched its market-leader standing for the fifth year in a row. In the automobile and LCV segments, FIAT sold 125,346 and 68,276 units corresponding to 13% and 25.7% shares of those markets respectively. The Egea, a car developed and manufactured in-house by Tofaş itself, sold 68,276 units and commanded a market share of 25.7%. The Fiat Egea also did us proud last year when the 500,000th vehicle rolled off the assembly line onto our country’s roads, further demonstrating Tofaş’s ability to make superior design and technology affordably accessible to a mass market.
In addition to a Limited edition of the Fiat Egea, Fiat also celebrated the first centenary of the Turkish Republic (1923) with a limited-edition “Hundredth Anniversary Special Series” of the Fiat Fiorino, of which only 1,923 units will be made. To mark the same occasion, a “Cumhuriyet 100 Yaşında” (“The Republic Is 100 Years Old”) logo was added to all new domestically-manufactured models rolling off our assembly lines. Bidding farewell to the Fiat Doblò as its manufacture ceases as a consequence of our plant’s revamped production plan, a fifth-generation version of that iconic van went on sale in our country. Still more progress was made in the LCV market electrification process with the introduction of all-electric E-Doblò and E-Scudo models. The 500e, which was the first milestone in Fiat’s EV journey and which picked up numerous awards soon after its launch, also sparked great interest in our country last year.
Jeep sales were up 50% in 2023, a year in which we registered noteworthy growth across all our premium models. In addition to e-Hybrid models of the Jeep Renegade and Jeep Compass, we also began selling the Jeep Avenger, an ecofriendly compact that received the prestigious “European Car of the Year” accolade in 2023. Powered by the introduction of a Plug-in Hybrid Q4 version of the new compact SUV Tonale as well as by new versions of the Giulia and Stelvio, our sales of Alfa Romeo models tripled last year.
Having experienced a remarkable 12-fold increase over the past three years, sales of Maserati, a prestigious brand in the luxury segment, topped 600 units in 2023. The second-generation Maserati GranTurismo also went on sale in our country last year.
Looking at the 2023 financial results of the strong operational performance outlined above, we see that Tofaş’s revenues were up by 3% year-on and reached TL 127.6 billion while its net profit grew by 61% and weighed in at TL 15.1 billion.
Turning now to other matters, the signing of two strategic-cooperation agreements–a framework agreement between Koç Holding and Stellantis Group and a share-acquisition agreement between Tofaş and Stellantis Türkiye–are major events in our company’s history. We expect that agreement-related formalities will be completed before the end of 2024 and we will be keeping the public aware of important developments as they unfold.
OUR COMPETITIVE EDGES: R&D, INNOVATION, AND TECHNOLOGICAL KNOW-HOW
As one of the most advanced facilities of its kind owned by any member of the Stellantis Group, the Tofaş R&D Center has both the competency and the responsibility for developing the group’s new vehicles. As a company that spends more on R&D than any other in Türkiye, Tofaş will also be looking to expand the scope of its center’s operations and R&D ecosystem and to increase its R&D exports in response to global needs for automotive software.
As of end-2023, the Tofaş R&D Center had completed 21 of 32 EU projects on its calendar. The scheduling of eight new projects last year brings the number currently in progress to 19. Through such projects, the center collaborates with more than four hundred international universities, research institutions, and industrial concerns in the development of innovative automotive industry technologies and processes. In addition to the EU projects, the center is also currently working on nine nationally-funded TÜBİTAK projects in the areas of AI-supported manufacturing, advanced materials, EVs, and sustainability-related issues. The Tofaş R&D Center has so far applied for 237 patents (33 of them in 2023 alone) in such areas as product and service-related vehicle components and production systems among others. To date, the center has been awarded 111 patents.
The Tofaş R&D Center is currently working on various projects in such areas as infotainment system software, connectivity, calibration, data science, and AI applications at the product development & software branch that it opened in the İzmir Institute of High Technology’s Technopark İzmir Software Center.
Our company’s digital transformation projects continue to gain momentum. We have undertaken more than 1,700 of these projects over the last five years–300 of them in 2023 alone–in line with our efforts to optimize factory operations and make them “smarter” through the deployment of digital applications. The Optimus Production Digital Transformation Program that we initiated to foster an in-house digital mindset across our organization came in second place in the “Large-Scale Enterprises” category of the “Productivity Project Awards” competition organized by the Ministry of Industry and Technology. We also attach great importance to the human resources aspects of this digital transformation. Through Tofaş Academy for example we provide needs-based training resources to expand our company-wide digital competencies. We also conduct in-house entrepreneurship programs to encourage people to develop projects capable of creating added value not just for our own company but across the automotive industry as a whole.
A DIVERSIFIED ARRAY OF CONNECTED-VEHICLE SOLUTIONS THAT IMPROVE THE DRIVING EXPERIENCE
We’re constantly looking for innovative ways to give vehicle owners the best possible end-to-end driving experience, such as connected-vehicle and associated ecosystem solutions that deliver value-adding services and address insurance needs.
In 2023 we continued to enrich Fiat Connect with the addition of new functions that make it even more useful to vehicle owners. Developed in-house by Tofaş, Fiat Connect is Türkiye’s first and most capable vehicle-connectivity software system. We plan to make this technology accessible to increasingly broader audiences by incorporating it into our other vehicle brands and models in 2024 and beyond.
Looking ahead, we’ll continue to invest in connectivity solutions while also focusing on new ownership and usage-based business models. We’ll also continue to lead the market forward by expanding our existing vehicle-financing and insurance business lines with the addition of the software and connectivity-based solutions that we develop.
FOR A MORE LIVABLE TOMORROW…
Our approach to sustainability management centers on minimizing our environmental impact through responsible production, increasing our positive social impact, and creating long-term value while also prioritizing stakeholder engagement as we do so.
Our constant efforts to improve our environmental, social, and corporate governance performance are attested to by the regular inclusion of Tofaş’s shares in the BIST Sustainability Index. In keeping with the Carbon Transformation Program that Koç Holding initiated to combat the climate crisis through specific, actionable target identification and fulfillment, we have joined the international Science Based Targets Initiative, whose aim is to counter the adverse effects of the climate crisis. Tofaş has set a company-wide target of reducing its total Scope 1 and Scope 2 carbon emissions by 50% by 2030 through projects aimed at improving energy efficiency and generating and using solar power, with the ultimate goal of becoming net zero by 2050.
Tofaş consistently ranks among the top three automotive plants in the Stellantis Group on the basis of safety, quality, efficiency and similar performance indicators. We regard having a workplace environment which is safe and healthy and which promotes learning and progression for all employees as among our core responsibilities.
Similarly, we promote social wellbeing by prioritizing sports and education projects designed to support the healthy growth and development of young people. Through our “Basketball City” Bursa-based Tofaş Sports Club, we give young people everywhere in the country an equal opportunity to take part in sports and to benefit from the resources and means that we provide for them to do so. Through our “Next-Generation Tofaş” project, we have been using basketball as a way to make a difference in the lives of hundreds of kids in Bursa over the last eight years and continue to do so. Through our “Neighborhood Courts” project, we’re providing resources for everyone to play basketball at 46 locations in Bursa. As evidenced by the record-breaking number of visitors in its 20th year of operation, public interest in the Tofaş Museum of Cars and Anatolian Carriages that we established in Bursa as part of our efforts to protect our country’s cultural heritage motivates us to do even more while also increasing our responsibility to do so.
MOVING EVEN MORE CONFIDENTLY INTO THE FUTURE…
Drawing on its experience and expertise, Tofaş will continue to maintain a strong position in the face of the operational volatilities and uncertainties that lie ahead while also ensuring that the company remains the transformative leader of the ongoing evolution of Türkiye’s automotive industry.
In closing, I take this opportunity to extend my sincerest thanks to our shareholders, employees, suppliers, dealers, and customers as well as all our other stakeholders for their confidence in our company and for their support and contributions to its success.
Cengiz Eroldu
Managing Director & CEO
