Both PSA Peugeot Citroën and Fiat Auto are teaming up with Turk Otomobil Fabrikasi A.S. (TOFAS) to build a car production facility with an initial annual capacity of 135,000 cars, due to roll off the assembly line in late 2007.

The European Investment Bank (EIB) has loaned Turk Otomobil Fabrikasi A.S. (TOFAS) €75m for the joint venture that will produce small commercial vehicles for the European market. The project will assist the two major EU automotive companies to consolidate their presence in a strategic pre-accession market and help Turkey to build up a modern and competitive industry, contributing to prepare the country for EU-accession.

The EIB loan, part-financing for total investments estimated at €400m will result in an important expansion of the company’s production capabilities and create some 5,000 new jobs. The vehicles will be produced at TOFAS’ manufacturing plant in Bursa, a city of 1.5m people in northeast Turkey. Head quartered in Istanbul, TOFAS is listed on the Istanbul Stock exchange and currently has an annual production capacity of 162,000 vehicles.

“Turkey is developing into a dynamic emerging market and offers attractive conditions for investors wishing to manufacture high quality products”, said EIB vice-president Wolfgang Roth. He added that this additional investment reflects the Bank’s confidence in the Turkish automobile sector.

The Turkish Automotive Manufacturers Association (OSD) predicts that the country’s production capacity for cars, which is currently around 920,000 units, will more than double by 2010, based on domestic demand as well as export opportunities. In recent years, political and economic developments in Turkey have resulted in a sharp increase in FDI in 2005 and 2006, with the Turkish car industry just one sector of the economy to benefit. Financing made available by the EIB in Turkey since 2000 stands at over €4.5bn and relates to investments in a wide range of key economic sectors.