Following its successful domestic debut, Turkish EV startup Togg is preparing to launch in Germany, where sales of the T10X SUV are scheduled to start before year-end. Togg will add markets including France, Italy, the Netherlands and Sweden as it seeks to have 1 million vehicles on the road across Europe by 2032. CEO Gurcan Karakas is confident that Togg can compete outside its home market because it has spent years evaluating future rivals. Togg, which prefers to call its vehicles smart devices, expects to generate as much income from traditional revenue channels as nontraditional ones in less than 10 years and become profitable as early as 2027. Karakas outlined the company's plans in an interview with Automotive News Europe Managing Editor Douglas A. Bolduc at the 2024 CES technology show.
How Europe-bound Turkish EV maker Togg aims to challenge Chinese, others
CEO Gurcan Karakas expects the company to generate as much income from traditional revenue channels as nontraditional ones such as digital services in less than 10 years and become profitable as early as 2027.
Meet the boss
Name: M. Gurcan Karakas
Title: Togg CEO
Main challenge: Having 1 million vehicles on the road across Europe by 2032.
Togg got more than 177,000 order for its first car, the T10X, but currently only has capacity to build 20,000. How are you dealing with this big gap between demand and what you can produce?
Indeed, it was too many. For the T10X we were expecting orders to be double that of the production volume not nearly nine times more. On the plus side, that shows people in Turkey are ready to transition to a new technology. We took that interest as a sign that we are doing something right. Now the stress we face is increasing production to meet demand, but it will take time because we didn't expect to reach that level of output at our plant near Istanbul for four to five years.
What is Togg?
Founded in 2018, Togg, Turkey's first homegrown electric vehicle maker, is based in Gebze. Its European headquarters is in Stuttgart, Germany.
Togg, which is short for Turkiye'nin Otomobili Girisim Grubu, is the culmination of a €3.5 billion ($3.83 billion) project championed by President Recep Tayyip Erdogan. Togg's subbrands include Trumore, which is a digital experience platform.
Togg is supported by Anadolu Grubu Holding, which has the licensing rights to McDonald's in Turkey, distributes Coca-Cola products in countries such as Jordan, Syria and Iraq and has expansive holdings in the energy sector; BMC Otomotiv Sanayi ve Ticaret, which builds commercial trucks, buses, military trucks and armored vehicles in Turkey; Turkcell Iletisim Hizmetleri, which provides telecommunications in Turkey; Zorlu Holding, which makes textiles, white goods and electronics; and the Union of Chambers and Commodity Exchanges of Turkey, which is the country's highest legal entity representing the private sector.
What effect did the high level of interest in a locally made EV have on the overall market?
This helped us make a name for ourselves while it also changed the market. In 2022, fewer than 8,000 EVs were sold in Turkey but in 2023 that rose to about 72,200. Togg had sales of nearly 19,600 vehicles, so we are the EV market leader, and Turkey is now one of the top 10 EV markets in Europe. In Turkey and Europe, there is still potential for EVs to grow. That gives us a chance to grow at home and in Europe once we launch there starting this year.
Do you anticipate having a similarly large number of pre-orders for the T10F that debuted at CES?
Hopefully not (laughs). But seriously we are very proud of what the T10X achieved because we didn't just ask €100 for a pre-order. People had to pay the equivalent of €3,000. They had to show a serious intention to buy.
Did you give that money back to the people knowing you couldn't fulfill the majority of the orders?
Yes, because we are a new brand and we want to build trust. Also, it's worth noting that we pre-sold everything online. So, there were no dealers involved. Everything was done online to complete the 20,000 orders for the T10X. This is a completely new experience for most people because it was truly one-stop shopping, which saves time and effort. This was possible because of our digital platform called Trumore, which is short for truly more than a car. Along with being used for buying and selling cars, Trumore is our entry into the digital world.
Who is Gurcan Karakas?
Mehmet Gurcan Karakaş has been the CEO of Turkish EV maker Togg since it was founded in 2018.
Karakas joined Togg from German component supplier Robert Bosch, where he worked for nearly three decades.
He joined Bosch in 1990, two years after graduating from Middle East Technical University with a degree in mechanical engineering.
In 2002, Karakas was added to Bosch's executive board. Two years later he was named CEO of Bosch Turkey. In 2007 he moved to the supplier's aftermarket division in Karlsruhe, Germany, as head of global sales for the Bosch Car Service.
In 2011, he moved to Bosch's headquarters near Stuttgart to lead marketing and sales and automotive strategies. He spent his final five years at Bosch as the board member in charge of the electrical drives.
Is that how you are keeping connected with the thousands of people who pre-ordered the T10X but were not able to get one?
Yes. Trumore, which has 1.5 million users, includes two wallets. One is the classic credit card linked to a bank account via an e-wallet. The second one is a digital-asset wallet also known as a crypto wallet, where you can have NFTs (non-fungible tokens) and make transactions. We have more than 350,000 e-wallet accounts and 60,000 digital-asset wallets. This is a pure KYC (know your customer) process. We know these customers like a bank.
Germany will be Togg's first market outside Turkey, with sales set to start in late 2024. A lot of automakers want to get into the €20,000 to €25,000 price band, but your prices will be in the €40,000 to €50,000 range. Since Togg is a new brand, doesn't that price put you at a disadvantage?
No. Not at all. Why? Because despite hearing a lot of automakers say they will offer a €20,000 EV, so far there are very few on the market. So, when I'm asked whether we aim to offer a €20,000 EV my answer is, No. If you want to have something that is state of the art when it comes to the battery, connectivity, safety, cybersecurity and the electric architecture, that already costs more than €20,000. So, to sell for that price means you need to give away something. We decided to start with a compact SUV because that body style is aspirational and has wide appeal. This year we added the T10F compact fastback because we think younger buyers who appreciate a coupe-style design will like it. Our third car will be smaller than the first two and it will be less expensive, but it will not be priced at €20,000.
Could you provide more details on the future model plan?
The third vehicle will compete in the B-segment. So that means it will be smaller than our compacts and it will be more cost competitive.
Can you use your C-segment platform for the small car or will you need a new architecture?
We will use the same base architecture.
How is that possible?
The modularity of today's state-of-the-art vehicles makes them completely different than in the past. We used to talk about dimensions. For instance, the sizes of the engine and gearbox. For each engine type we had to manufacture at least 150,000 units and usually 250,000. With the move to modularity the key is the battery, which comes down to the size of the cells. So, if you have the same cells everywhere in your platform then you automatically have modularity. When it comes to software, again, size is not an issue. With a click you can have it in all your platforms. For the power electronics it's all about designing it properly from the beginning. From the start we worked with Qualcomm, which delivered consumer-grade chipsets. With these changes, 80 percent of your cost is scalable because it's all commonized. The new world is different. We have already commonized the highest portion of our costs.
It has been about six years since Togg was founded. How long will it take to become profitable? Seven years? Perhaps 10 years?
Much less and it follows the same logic as we just talked about, which is how much quicker we can reach scalability today compared with in the past.
Does that mean within the next couple of years?
We started selling cars in 2023. So, to reach profitability I think it will take four to five years from that point.
How will profitability break down? Will 75 percent come from car sales and services and the rest from digital services and subscriptions?
Based on an analysis of the market that we did with Boston Consulting, the conclusion was that by 2032, give or take two years, the profitability structure will shift to a 50-50 mix for digital services and car sales. That means if you are not ready for this today, you have already lost tomorrow.
Could you elaborate?
The battery, power electronics and software represent 80 percent of the cost while the chassis accounts for the rest. If you don't have the competency and development expertise in all three of those areas then you cannot control your cost base. You are at the mercy of external third parties. That is why from Day One we focused on the battery, power electronics and software.
Since the EV is still relatively new to the market and not the dominant powertrain in Europe, a lot of newcomers think they have just as much of a chance of winning over a customer as an established brand. Do you believe this wide open field will work to Togg's advantage?
Definitely. Somebody needs to break the ice and so far that has been Tesla and BYD. They have provided proof that some other companies are capable of producing good cars. I think the biggest challenge facing the established automakers is that they have been doing something really good for a very long time and they have been very successful. Now there is an urgent need to change. Some brands see this and some do not. If I look at most established brands, 70 percent of their bill of material is still the engine and gearbox. These are their most important parts. Therefore, the executives with the most knowledge about these parts have been the most important people in the company and have been promoted to the top jobs. They are at the top of the pyramid. But now they have to make a decision on something crucial such as picking the best battery chemistry or the best software when there is such a wide range of options. They often delegate this decision to an in-house task forces or to consultants. That adds time, therefore we can be faster.
The Turkish government has made it very difficult for the Chinese EV makers to compete with Togg by imposing a 40 percent additional tariff on EV imports from China. That helps Togg at home, but you have aspirations to enter Europe. Are you ready to take on the Chinese outside of Turkey?
When we started five years ago we went to China to look at models that were similar to what we planned. Then we applied European regulatory standards to the best of our ability to determine the key target costs of all the systems and subsystems. In total, there were 102 components to check. We hired a firm to dismantle the vehicles to estimate the material, assembly and intellectual property costs. Then they calculated manufacturing costs based on low- and high-wage locations. Separately, we had a company get quotations from suppliers for the components. With all that data, we set our target cost basis. That means we have already made sure our products are cost competitive with the Chinese.
What happened if you needed to make a change to your product during this process?
If someone on our team came with an engineering change, we looked at how that would impact our target cost. If it increased the overall cost, we found a way to reduce costs elsewhere. We did this because we saw what happened to some other companies during this time period. Their costs were not under control and it caused them to go fail. As part of our work with Boston Consulting we benchmarked close to 20 companies. This included long established ones as well as EV makers ranging from Tesla to Byton. This helped us understand why some companies were able to move fast and succeed and why others struggled. The common denominator was cost. It is the only thing you can control.
Do you see cost control as the key to Togg's possible success in Europe?
Yes, I believe this will help make us competitive against the Europeans as well as the Chinese, as long as the Chinese are not selling at dumping prices. We also believe that if the Chinese can be successful, so can we.
After launching in Europe, what other markets is Togg targeting? Are you looking at the U.S. and China?
Our business plan until 2032 doesn't include launching in U.S. or China. However, since we have seen good progress, we could be in a position to surpass the 175,000 production capacity at our plant in Turkey earlier than expected. We think that with demand at 350,000, we would still primarily be in the European space. If demand goes beyond 500,000 or 600,000 then we would need to look at additional markets. For instance, maybe a low-cost electric vehicle for Africa would be a viable option. Beyond that we would also need to choose whether to go to the U.S. or Asia to achieve those higher volumes. But we would also need to apply the new way of thinking to this plan and ask ourselves: Should we try to reach production of 1 million smart devices (vehicles) in the next 10 years or seek to have 30 to 50 million users on Trumore? We will have to decide on this in the next three to four years.