Turkey hikes EV tax: Fresh setback for Tesla

ISTANBUL: Tesla Inc's efforts to mitigate slumping European sales with gains in Turkey may be at risk after a surprise tax hike in one of the automaker's fastest-growing markets.

Turkey has raised the lowest tier of its special consumption tax for electric vehicles - which includes Tesla's top-selling Model Y - to 25% from 10%, according to a presidential decree published in the country's Official Gazette.

The move adds to challenges facing Tesla CEO Elon Musk, who warned of difficult quarters over the next year or more as the company contends with the phase-out of US EV subsidies and slow progress in autonomous vehicle development.

Turkey has emerged as an increasingly significant market for Tesla, helping alleviate falling demand elsewhere in Europe.

Musk name-checked the country during the company's quarterly earnings call Wednesday.

Tesla sales in the country soared 171% in June to 7,235 units, with the Model Y taking the top spot among EVs.

In same month, Tesla registrations across Europe dropped 23% to 34,781 vehicles, according to data published Thursday by the European Automobile Manufacturers' Association.

Tesla's success in Turkey has been fueled by a local market-specific Model Y, designed to qualify for a lower tax bracket.

Until now, Turkish customers could buy the vehicle for around 1.87 million liras (US$46,100 or RM194,334) under the 10% tax rate.

The new levy could push prices up by approximately US$6,000 (RM25,293), a jump that may hurt demand, especially as tax brackets for many combustion-engine rivals remain largely unchanged.

The tax hike is set to affect not only Tesla but also a range of competitors banking on Turkey's growing demand for EVs.

Chinese giant BYD Co. - which plans to begin local production in Turkey - has been offering its Dolphin, Atto 3 and Seal models in the same favorable tax category.

Other global manufacturers, including Volkswagen AG, Hyundai Motor Co. and Stellantis NV, also market affordable EVs in Turkey that could be impacted by the policy shift.