Ege Endustri The proposed investment consists of senior loan package up to EUR40 million(mn) to Ege Endustri ve Ticaret A.S. (Ege Endustri or Company). Established in 1964 in Izmir, Turkey, the Company is an export-focused, Turkish manufacturer of axles and suspension system components (e.g., axle housings, drive axles, tag axles, trailer axles, self-steering tag axle, front axles, and front axles components) and its products are mainly used in heavy commercial vehicles. As of December 31, 2021, the Company has a total manufacturing capacity of 280K pieces per year and employs over 600 staff. Companys investment plans include (i) consolidation of existing two plants in a new plant based in Aegean Free Zone in Izmir, Turkey, (ii) increase production capacity of conventional and electrical axles with additional product lines and (iii) upgrade Companys production technology (the Project). Economywide effects-Increasing exports through value addition: Automotive (auto parts)  industry is one of the primary drivers of Turkeys exports and economic growth. In 2020, exports of vehicles and vehicle parts amounted to US$22.7 billion, representing 13% of total exports of goods and services. Vehicle parts, in turn, amounted to US$4.6 billion or 3% of total exports. Through the Project, the Company will increase its exports, directly contributing to improving Turkeys current account deficit (CAD)  particularly important amid the volatile macroeconomic context experienced recently by the country. The Project is anticipated to contribute to the Turkish economy by both direct value addition, as well as through indirect effects induced in the value chain. Finally, IFC anticipates that through increased backward linkages, the Project will contribute to indirect employment in Ege Endustris supply chain.

Integration: The automotive supplier industry is well developed in Turkey. In 2020, overall vehicle parts represented 2.6% of Turkish exports, valued at US$4.6 billion. The most important challenges faced by Turkish automotive suppliers are (i) subdued adoption of new technologies, which may result in lower value-added products and associated decline in margins, given the increase in global demand for technology-based products and (ii) limited strategizing and investment to develop the necessary capabilities and positioning to remain competitive in the future.  It is imperative for the Turkish automotive supplier industry to prepare for the transition from traditional systems to higher-technology adoption, per the market dynamics as global automotive OEMs are ramping up their production of electric vehicles (EVs) and hybrid engine models. 

Ege Endustri has emerged as one of the leading players among Turkish automotive suppliers, through continuous investment in technology, research and development, cost competitiveness and capacity expansion.  IFCs Project will build on Ege Endustris ongoing strategy for the electrification of its products. The consolidation in a single facility of two existing plants and adoption of robotic equipment for automated manufacturing technology will enable the Company to achieve economies of scale and increased cost-efficiency, expanding the output capacity to produce axles and suspensions for e-trucks. The success of the Project will provide demonstration effects to other automotive suppliers in Turkey to improve their cost-efficiency, enhance operating standards, and expand capacity for local production of higher-technology products, which can potentially strengthen their forward linkages and integration with global OEMs. The Turkish automotive suppliers will be incentivized to follow suit, amid increasing pressures in the global supply chain as automotive industry leaders gradually increase the electrification of their products. Furthermore, in the long-term, Ege Endustris capacity expansion for e-truck components has the potential to support local OEMs of electrified heavy commercial vehicles in Turkey.