Straddling Europe and Asia, Turkey is widely regarded as being able to offer the best of both worlds, in terms of culture. HVACR manufacturers in the country are proving to be no different with regard to the products they are purveying, and this characteristic, in many ways, seems to be the reason for the sector’s resilience in the midst of global economic challenges.
“While the HVAC&R market in Turkey shrank by five per cent in 2016, 2017 has already seen some improvement and a positive trend in growth rates,” says Serdar Kumbaraci, Director General-UAE, Turkish Trade Center (TTC). “In the third and the fourth quarters of 2017, this trend is likely to continue, and we expect a growth rate of 4-5% by the end of the year.” Kumbaraci says that in 2016, the export volume of the sector had reached USD 3.6 billion and that the overall expectation for 2017 is USD 4 billion.
Ganim Dokuyucu, General Manager, Mechanical Engineer for Ulpatek, echoes this buoyant view, saying Touching on the dynamic nature of Turkey’s HVACR industry, Kumbaraci emphasises that there has been a 10% increase in export figures in the first six months of the year and that the TTC is optimistic that the trend will continue in the second half of the year.
On the other hand, he says, most of the products manufactured by the sector are the so-called comfort products. As a result, political instabilities and economic recessions could result in a dramatic decrease in trade volume, he adds.
In the face of such difficulties, however, Kumbaraci stresses that a careful analysis of the Turkish market will reveal that foreign exchange rates have been stabilising and “last year’s hardships have been overcome, which secured an atmosphere of stability”.
Adds Serkan Uzun, Export Sales Director of Üntes: “Despite the slowdown of the global real estate market in the last 10 years, Turkey has provided a reliable investment environment, which has supported the growth of the HVAC sector. “HVAC producers are very pleased with the situation, because this positive air has increased the presence of Turkish companies in foreign markets,” he says.
Elaborating on Uzun’s words, Dokuyucu says that Turkey is in the 24th place, in terms of HVAC sector exports to all over the world and that the sector has set a target for USD 25 billion by 2023. “The HVAC sector is one of the fastest growing markets in our country in recent years,” he adds. “The fact that this market is constantly developing has recently attracted the attention of producers in Europe.”
Kumbaraci adds that the buoyant atmosphere, aside from attracting more foreign investors, is resulting in higher sales figures and the construction of new facilities. “The Turkish HVAC-R market has grown rapidly, and many companies around the world, having witnessed these developments, have invested in Turkey,” he says. “Currently, a great number of firms are manufacturing in Turkey. The subsequent technological investments, and the competitive environments [have] resulted in considerable improvements in terms of product quality. The Turkish HVACR sector exports a remarkable portion of its products to European countries. This is another indicator of the quality of Turkish HVACR products.”
Kumbaraci says that Turkey’s growing attractiveness to investors is largely owing to the support measures available for foreign investors, noting that a large number of leading global companies in the sector have made Turkey a production base through partnerships or purchase of firms. Kumbaraci names the Atlantic Group, Baymak, Bosch, Carrier, Daikin, Ferroli, Grundfos, Johnson Controls, KSB, LG, Ross, Schako, S&P, Systemair, Vaillant, Viessmann and Wilo as among those who have a strong presence in the country.
A GLOBAL MODEL
The positive trajectory of the country’s HVACR sector is apparently a result of the growth model adapted by Turkish manufacturers, which puts a strong emphasis on export. “The only way to create a country that is able to sell its products abroad and secure foreign currency inflow is to manufacture quality products, in accordance with the legal provisions and needs of purchasing countries and sell these products through the right channels,” says Kumbaraci. This, Kumbaraci adds, means that manufacturers take into consideration not only the European Union standards, but also the specific rules and regulations of other countries.
“An annual growth rate of 4-5% is only possible by selling products, and especially technological products abroad,” he stresses. “I am happy to say that we have travelled a long distance towards this objective. Turkish products are now sought after and preferred in many markets across the globe.” The biggest importers of Turkish products, Kumbaraci says, include Germany, Britain, Iraq, Italy and Romania, adding that a significant portion of the country’s export goes to Member States of the European Union, in addition to Turkey’s bordering neighbours.
Docuyuku believes that the ability of Turkish manufacturers to adapt to international standards is a positive feature that makes it stronger in the market. “We have a chance to learn innovations instantly,” he says. “The standards that are published in Turkey about our sector do not pose any problem for adaptation, because the directives are based on these international standards. The existence of these standards is actually an opportunity for companies that do their job properly.”
Manufacturers have seconded this, with many noting that a bulk of their clients is abroad. Serdar Tümen, Business Development of Friterm, shares that 45% of the company’s sales comes from Europe. Serkan Altintel, Project Sales Manager of Frigo Mekanik, says that his company is exporting to more than 60 countries in the world. Kadir Akpinar, Director Foreign Trade, FAF Valve Company, says that 40% of the company’s sales is spread across 60 countries. Uzun adds that his company is directly exporting to 45 countries and that it continues to cultivate strong channels in Europe, South America, Middle Asia, Australia and the rest of the MENA region.
QUALITY AND COST: THE BEST OF BOTH WORLDS
The manufacturers believe that other factors, such as a skilled workforce and cost-competitiveness contribute to Turkey’s upswing in global acceptance. “The values that underpin the excellence of the Turkish HVAC industry are high-quality human power and world class production experience,” says Uzun. “We understand that foreign investors have chosen Turkey as the production base in the region, and in the following years Turkey will continue to be a safe harbour in this sense. The competitive advantage of Turkish brands comes not only from price competition, but also from the competitive power of quality product production.”
Adds Sadath Hussain, Senior Sales Engineer, TTC: “If you compare Turkish companies, in terms of quality, they are on par with the other international brands. When it comes to pricing, they have an advantage, because it is better than that of other manufacturers.”
Tümen adds to this by saying that energy-wise and in terms of labour costs, Turkey has an advantage over many other European countries. As Mohit Kumar, Senior Sales Engineer, TTC, points out, the cost of labour is only a third of what it is in the rest of Europe. This gives the country’s manufacturers flexibility in terms of the solutions they are able to offer.
Further, the country’s strategic location also lessens transport costs. “Turkey is playing an active role in the market because of its connection to Europe, Asia and the African continent as a location,” says Ertuğrul Koçak, Project Engineer, Korkmaz Panel. “Being close to big markets opens the way for companies to sell. Efforts to produce in European standards increase the quality of manufacturing companies.”
Hussain adds that another advantage offered by the strategic location is a shorter lead time. “I have spoken to many clients that say they are not able to place an order, because some manufacturers take a very long lead time to deliver the material,” he says. “That’s not a problem you will face with a Turkish manufacturer.”
TRENDS IN TURKEY
With its growing export market, Turkey’s manufacturers say they are continuing to adapt to global trends, characterised by a call for products that are energy efficient, help the cause of curbing emissions and promote good air quality. Kumbaraci confirms this when he says: “Our companies are principally focusing on, and investing in, R&D and innovation. As in other parts of the world, the importance of Internal Air Quality (IAQ) is better perceived in Turkey, recently.” As a result, Kumbaraci says, there is an increase in products and processes that target provision of not only hot and cool but also clean air with minimum energy consumption.
“There are many legal regulations in Turkey that affect the sales and technology of many products,” Kumbaraci says. “Legal regulations, such as prohibition of Freon gas in air conditioners, energy labelling practices in buildings and CE branding have laid the foundation for products with improved levels of technology, trustworthiness and quality, which result in more and more people preferring these products.”
Kumbaraci shares that project developers, mechanical companies and manufacturers in the country are also working to catch up with the growing clamour for zero-energy buildings. Additionally, Kumbaraci observes that within commercial HVACR devices, energy efficiency (EER, ESEER) performance values are becoming more and more important. “The use and manufacturing of energy-efficient products in the Turkish market, which has been growing and developing for long years, is also increasing,” he adds.
Uzun confirms this trend, adding that Üntes has invested heavily in factories to increase the production of energy-efficient products and to improve IAQ in the buildings, in an effort to address the needs of investors, due to the increasing demand for real estate. This has led them to focus their investment on less-energy-consuming technology and production of systems that are fully compatible with the EcoDesign directives.
Kumbaraci says that inverter-based technology has seen a rapid spike, with the use of inverter-based splits being made mandatory in Turkey. He shares that the VRF market is also rapidly growing. “VRF market in Turkey is the biggest VRF market in Europe,” he stresses. “In the short future, more investments will be made in VRF manufacturing. The VRF market has grown more than central air conditioning systems in the last 15 years. The combined operation of VRF exterior units and air conditioning switchboards is also developing and affecting the penetration trend of the market.”
ON THE COLD CHAIN FRONT
Tümen echoes the increasing recognition of energy efficiency with regard to cold stores. “In Turkey,” he says, “companies are always asking about energy efficiency, and energy prices are increasing.” Thus, he says, Turkish companies are always taking energy efficiency into consideration, which has led to an increase in demand for ammonia-based systems.
The refrigeration industry has a lot of solutions, Altintel says, adding that they are tailor-made in nature. No one project, he says, can be the same as the other. Therefore, the engineering is the most important thing, especially the experience and the reputation of the manufacturer. Speaking on the trends related to cold stores, Altintel adds that though there is a move towards ammonia-based systems, his company is careful to address unique needs in terms of capacity.
Hussain, speaking on behalf of Frigo, says that the strategy is to normally recommend ammonia for larger-capacity plants, in an effort to reduce overall operating cost. “We are targeting the audience based on their requirement,” he says. “If it is a small cold room, we suggest going with Freon-based equipment, and if it is a sizeable project then we advise ammonia refrigeration.” Hussain admits that there is a challenge when it comes to going for ammonia refrigeration, as some are wary of its hazardous properties, but that they are also aiming to educate people that technologies do exist to avoid such mishaps.
WHAT DOES THE TURKISH GROWTH STORY MEAN FOR THE GCC REGION?
With Turkish manufacturers aiming to address global standards, it is evident that they are leveraging their competitive advantage, in terms of quality and pricing, to GCC region countries and making a proactive move to enter the market. “The Gulf region is very close to my country as a location,” Koçak says.
Altintel says that Frigo Mekanik is looking towards exploring the potential of the UAE market, owing to the country’s position as a global business hub. He adds that he expects to see a higher demand for cold storage in the GCC region. “Storage is life,” he says. “Outside, it’s about 38-40 degrees C, and in here, you are comfortable. It is important to ensure thermal comfort for food, meat, poultry, fruit, vegetables and dairy. Everything has to be under control.” Hussain says that Turkey has also observed massive developments within the hospitality sector with a large number of new hotels coming up in the UAE. “It means,” he says, “there will be huge scope in the storage sector.”
Tümen adds that Friterm has been selling to the Middle East, though indirectly, with many of the contractors buying products for installing in cold store projects they are involved in. “We want to expand our business in the UAE and across the Gulf,” he says, adding that this is the reason that he, along with fellow Turkish manufacturers have joined the TTC, which has recently opened its base in the UAE.
“We are trying to promote all these developments by means of sectoral associations and Turkish HVAC-R exporters (İSİB),” says Kumbaraci with regard to the goals of the TTC. “To be frank, we have to admit that we have not been fully successful in advertising these developments in the GCC [region] countries. Additionally, thanks to the Turkish HVAC-R Trade, which has opened in Dubai, we as a sector will be able to share all these developments with the GCC [region] countries in a more effective way.”
The writer is Features Writer, Climate Control Middle East.