Turkish mechanical engineering hopes for new momentum

“Despite the continued difficult economic situation in Türkiye, with inflation still at around 30%, there are still German companies that are investing in Türkiye in their search for alternative locations and relocating (parts of) their production here,” reports Burkhardt Hellemann, executive board member of AHK Türkiye. “However, these are mostly companies that have been active in the Turkish market for many years and are therefore very familiar with the sometimes volatile business conditions,” the delegate of German industry in Türkiye goes on to explain. “German ‘newcomers’, for whom Türkiye appears too crisis‑dominated, are more likely to hold back on their commitments.”

“At least German exports to Türkiye in 2025, according to preliminary data from the Federal Statistical Office (Destatis), rose again by around EUR 1 billion, or 3.7%, to EUR 29.7 billion, after German exports to the Bosporus had fallen by EUR 2.4 billion, or 7.8%, in the previous year,” Hellemann adds.

And it was not so long ago that German mechanical engineering companies were able to enjoy good business in Türkiye. In the four years from 2020 to 2023, German machinery deliveries to the Bosporus rose, according to VDMA data, from EUR 3.6 billion by as much as 60% to EUR 5.8 billion, in some cases with annual growth rates of over 20%.

“In particular, manufacturers of drive, fluid, and conveying technology as well as food and packaging machinery and energy systems were able to record rising sales during these years,” reports Dr. Alexander Koldau, VDMA foreign trade advisor for the Near and Middle East, North Africa, and Turkey. “And although the trend has clearly been downward since then—in 2025, German machinery exports to Turkey fell by 3.7% compared with the previous year—the country still ranked 12th among German machinery export destinations in 2025, with almost EUR 5.2 billion. This export value is only a few million euros below that of the Czech Republic (in 11th place), but clearly behind Switzerland (EUR 6.1 billion – 10th place),” the VDMA expert continues.

The fact that business in Turkey is currently not performing better has a lot to do with the local economic framework conditions. “Although growth rates in Turkey are currently significantly higher than in Germany—according to its latest January forecasts, the IMF expects real GDP growth of 4.2% for 2026 after 3.5% in the previous year—the momentum remains weak by Turkish standards,” emphasizes Katrin Pasvantis, GTAI correspondent for Turkey.

High inflation and volatile exchange rates weigh on the economy

“The main reason is tight monetary policy, which helps stabilize inflation but at the same time dampens economic activity. With an inflation rate still at around 30% and high key interest rates, financing options for companies remain very poor. In addition,” the GTAI expert continues, “volatile exchange rates and rapidly rising labor costs are making business more difficult. At the same time, the depreciation of the lira is further increasing the cost of importing raw materials and intermediate products. This combination is also weighing on Turkey’s mechanical engineering sector—both on the manufacturers themselves and on their customer industries. The result is that industry is being significantly more cautious when it comes to investment.”

“Many Turkish companies that attach great importance to high technical standards are therefore planning more cautiously,” adds Dr. Koldau from VDMA. “To be successful in global markets, demand for German high-tech machines and components has traditionally been strong in many segments of the Turkish machinery industry. Thanks to German control components, Turkish machines are often competitive on the world market. On the other hand, plants manufactured in Turkey, which are frequently exported to the EU, are increasingly becoming serious competitors for German manufacturers. This is especially true because Turkish machine builders were for a long time able to benefit from the rapid depreciation of the Turkish lira that accompanied hyperinflation. They were able to offer their own products on the world market at relatively low prices.”

“To bring inflation, which at its peak was close to 100% per year, under control, the Turkish currency has now been stabilized through monetary policy measures. Recently, the Turkish economy has therefore” – the VDMA expert continues – “clearly lost international competitiveness.”

In addition, demand for capital goods that are primarily intended for the Turkish market remains low, among other things due to persistently high inflation and high interest rates.

"Problems comparable to those in the mechanical engineering sector are particularly evident in the weakening of the textile and clothing industry, one of the country’s most traditional industrial sectors," reports Katrin Pasvantis from GTAI. "Rising wages are colliding with already tight margins. This diminishes competitiveness and makes modernization more difficult. As a result, some manufacturers are now relocating their production to Egypt."

"The automotive industry is still one of the most dynamic industrial sectors at present," the GTAI correspondent continues. "The sector is benefiting from persistently high investments, especially in the areas of electromobility and battery production. Thanks to the customs union with the EU, Turkey is an attractive production location for the European market. In addition to expanding existing sites, manufacturers and suppliers, particularly from China, are increasingly investing in electromobility in Turkey." The ongoing investments in new capacities and technologies reinforce expectations that the Turkish automotive industry will consolidate its role as a major production and export location in the region over the long term.

Export-oriented companies plan capacity expansion

Above all, export-oriented companies are planning capacity expansions despite difficult conditions. According to VDMA, the decarbonization of industry is likely to progress with a view to the EU. Rising energy and labor costs are driving investments in efficiency and automation. According to the mechanical engineering association, investment plans are being made primarily in the chemical, defense, automotive industries and the energy sector. The OECD forecasts an increase in gross fixed capital formation of 5.2% for 2026.

The Turkish government is also hoping for new momentum from the Industry and Technology Strategy 2030, which President Recep Tayyip Erdoğan announced in May 2025. The comprehensive roadmap aims to strengthen the country’s technological independence, industrial capabilities, and global competitiveness. The ambitious strategy focuses on key sectors such as space technologies, defense, electric vehicles, semiconductors, renewable energy, green technologies, biotechnology, quantum computing, and artificial intelligence. According to the minister of industry, the budget for R&D and technology parks is to be increased to US$16 billion per year.

Sustainability is becoming more important

“With the entry into force of Climate Framework Law No. 7552 in July 2025, Turkish industry will, for the first time, receive binding requirements for emissions monitoring, reduction, and preparation for a national emissions trading system (ETS),” continues Katrin Pasvantis. “Together with the ETS, this will create a regulatory foundation that is likely to stimulate investment in efficiency, emissions reduction, and digitalization and to open up opportunities for technology and service partnerships.

At the same time, the Investment Plan 2025 of the investment council YOIKK, which was also published in July 2025, pursues the goal of making industrial production overall greener and more digital. For the chemical industry, this means—according to the expectations of the GTAI expert—that companies which adopt clean processes, automated procedures, and energy efficiency at an early stage can not only reduce costs, but also improve their competitive position.

In the Turkish food market, too, the medium-term outlook remains promising despite the tense situation, in the assessment of GTAI. Impetus is coming above all from rising demand for ready-made and convenience products, growing health awareness, and large-scale agricultural production. In addition, the expanding middle class, especially in western metropolitan regions, as well as the openness of the young generation toward international brands, is boosting demand for high-quality food products.

The Turkish mechanical engineering sector is broadly positioned

In general, mechanical engineering is one of Turkey’s key industries and is considered one of the largest growth drivers in the manufacturing sector. The industry, in which, according to Invest in Türkiye, more than 39,000 mechanical engineering graduates complete their degrees every year, supplies important intermediate inputs for numerous sectors such as chemicals, construction, automotive, energy, textiles, agriculture and mining. “The industry,” as Dr. Koldau emphasizes, “receives extensive support from the Turkish government. There is a comprehensive export promotion program as well as assistance, among other things, for participation in trade fairs, market research, setting up subsidiaries, registering trademarks and patents, and export financing.”

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According to VDMA data, Turkey’s machinery exports reached around EUR 16.8 billion in 2024. More than half of this equipment is destined for the United States and EU countries, especially Germany, the UK, France, and Italy. Turkey’s machinery imports amounted to around EUR 29.1 billion in 2024, according to the VDMA, with roughly 20% coming from Germany.

The Turkish mechanical engineering sector comprises several thousand highly specialized companies in total, some of them operating in niche areas, ranging from classic construction machinery and agricultural equipment to highly specialized CNC and processing systems.

The most important export segments are agricultural machinery, construction machinery, and systems for heating, ventilation, and air conditioning. Key manufacturers of agricultural machinery include Türk Traktör (tractors and agricultural machinery), Tümosan Engine and Tractor Industry Inc. (tractors and diesel engines for agricultural and industrial applications), Basak Traktör (a long-established tractor manufacturer with its own brand and production and export activities), and the Erkunt Group (ArmaTrac).

Hidromek is one of the largest Turkish manufacturers of construction machinery (excavators, wheel loaders, bulldozers), Çimsataş produces parts for construction machinery, cast and forged parts, and machined components. Eczacıbaşı Esan manufactures machinery and equipment for mining and heavy industrial applications, Ermaksan produces metalworking and sheet metal processing machines, and Durmazlar in Bursa manufactures textile and high-tech machinery, to name just a few major manufacturers.

Strong German presence on the ground

In total, several thousand German companies are active in Turkey, including many small and medium-sized enterprises from the mechanical engineering, supplier, and services sectors. One of the prominent German mechanical engineering companies on the ground is Siemens, which built one of its first foreign factories near Istanbul as early as 1961.

At another production site in Gebze (Kocaeli), an integrated production plant of global importance within the Siemens production network manufactures medium- and low-voltage technology, power distribution systems, and other electrical components. The German technology group Bosch has also been present in Türkiye since the 1970s and operates several production and development sites, including in Bursa for automotive components, hydraulic systems, and special-purpose machinery.

The German technology group for automotive and industrial technology ZF Friedrichshafen AG has also relocated parts of its production to Türkiye with several manufacturing sites. The Dürr Group has been represented in Izmit since 2007 with a subsidiary and develops plant engineering and process solutions there in the machinery and manufacturing sector. Further examples include thyssenkrupp Asansör, part of the thyssenkrupp Group, which operates a production facility for elevators in Dilovası/Kocaeli, and the GHH Group, a manufacturer of special-purpose machines for mining and tunneling, which also distributes its products in Türkiye through partner networks.

Many other German mechanical engineering companies are active in Türkiye through representative offices, sales agencies, or long-standing partner networks, for example in the machine tool and production technology sector (such as DMG Mori, Emag, Heller, Hermle, Index/Traub).

Among the many German medium-sized mechanical engineering companies, some of which have been active on the Turkish market for many years, is Hammelmann GmbH from Oelde in Westphalia. The market-leading provider of high-pressure pumps and technical systems for high-pressure applications for more than 70 years is represented by its own subsidiary in Istanbul and offers service, customer support, and technical consulting directly on site.

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Arburg GmbH + Co. KG from Loßburg in the northern Black Forest, a globally leading manufacturer of plastic injection molding machines and automation solutions, has also had a branch in Beylikdüzü near Istanbul since 1996. Likewise, the Schmid Group (Gebr. Schmid GmbH) from Freudenstadt in the Black Forest, a long-established mechanical engineering and technology company, has been working for years with Turkish partners (for example, the Pekintas Group), for instance to scale up the production of energy storage solutions and systems.

Since September 2020, Dieffenbacher GmbH from Eppingen, a traditional plant and special-purpose machinery manufacturer focusing on wood-based materials as well as pressing and production systems, has also been represented with an office in Turkey in order to strengthen regional business development and support local partners.

KMM Automation GmbH from Frankfurt am Main also maintains a technical office in Izmir. The provider of automation and engineering solutions wants to use its local branch to support local and international projects with a German-speaking engineering team.

It is therefore not surprising that Burkhardt Hellemann from AHK Turkey has the following tip for “newcomers” in Turkey: “I especially encourage companies that have no experience with the Turkish market yet to travel here and get a first-hand impression of the reality. In my view,” Hellemann continues, “it is not only important to have seen Istanbul, Ankara and/or Izmir or Bursa at least once. The Turkish entrepreneurial mindset also continues to hold many positive surprises in store, even for us. If you decide for (or against) Turkey as an investment location, you should in any case only do so after spending a week here on the ground.”