Turkish supplier excels as power system component exporter

May 04, 2023

By Becky Schultz06 February 2023

Turkey might not be the first pin you would think to place on a map of the global supply chain for mobile power system components. Yet, the country is home to a major long-term supplier to such leading OEMs as John Deere, Mercedes, Volvo, CNH, Renault and more. Headquartered in Istanbul, Hema Endüstri A.S counts itself among major international component manufacturers, with much of its business centered on global markets.

Part of the family-owned business conglomerate Hattat Holding Group, Hema was established in 1973 as a producer of gear pumps and has since grown to become one of the leading engineering and manufacturing companies in Turkey. Its product mix now includes hydraulic gear pumps and control valves, crankshafts, transmissions, commercial vehicle steering systems, powertrain components and more for industries including construction, agriculture, automotive and defense, among others.

Engine blocks and crankshafts are the company's main product groups. "Our biggest turnover occurs from engine components production," said Saadettin Pey, deputy general manager, Commercial, Marketing & Sales, Business Development, Hema Endüstri. "We are one of the biggest suppliers of Caterpillar/Perkins," he added, delivering up to 200,000 parts to them annually.

Drivetrains, including front axles, transaxles, gearboxes and single gears, represent the company's second largest product segment, followed by hydraulic system components – with the majority of all the company's products sold beyond the country's borders.

While about a third of Hema's annual turnover stems from domestic sales, nearly 70% of its revenue is almost evenly split between Europe and the United States. The remainder is derived from other export markets, including China, India, Pakistan, Mexico and Brazil.

"We are an export company," Pey emphasized. "In Turkey, export companies are always the strongest companies."

That said, nowadays Turkish monetary policy has placed increasing pressure on exporters. "Pressured exchange rate plus high inflation in Turkey is a big disadvantage for the export companies like Hema," Pey said. "It means that our general expenses – our labor costs, our electricity and energy costs – are increasing on an exchange rate basis."

While such rising expenses present challenges, Hema has made a conscious decision not to pass all the costs on to its customers in order to remain competitive. "For the domestic companies, they know what we are facing. But for the export customers, it is quite hard to explain to them what's happening domestically," Pey explained.

He is confident, however, that conditions will eventually be balanced out – "not from the government but from the nature of economic developments."

Fortunately, Hattat Holding has a strong financial standing thanks to a diverse portfolio of about 20 companies ranging from mining to automotive and tractor manufacturing. This has enabled Hema to continue to invest in production equipment and research & development regardless of economic conditions.

"We do invest a lot. For example, from 2015 to 2018, we invested €80 million ($84 million) in our production premises," Pey said.

Even in 2018, Hema continued to invest €20 million ($21 million) in its operations for renewables, new machinery and capacity enlargement.

"We are very lucky. All our customers believe in us, and they are always willing to support us during the hard times of COVID and global crises because of our [strong] capacity for just-in-time delivery performance," Pey said.

For 2023, Hema has budgeted €35 million ($36.7 million) to invest as it looks to the future of its business.

Like many suppliers, Hema sees a need to become involved in electrification. The company has already taken its first steps by supplying a Turkish manufacturer with the front transaxle and gearbox for an electric tractor. It is also developing gearboxes for an Italian car manufacturer to produce small electric-powered urban vehicles.

"They are in the prototype phase… but we’re already involved," said Pey.

At Bauma 2022, Hema displayed an electric pump for battery-electric buses and trucks as well as an electric hydraulic steering gear for commercial vehicles. While these products are not yet available for market, Hema plans to continue to move forward within these and other product areas. "We are trying to electrify all our product groups," Pey said.

Product development is not limited to electrification. Hema has already worked in partnership with one of its customers to develop a liquid natural gas (LNG) pump for Volvo Trucks. Now, engineers from both Hema and its customer are collaborating to explore the pump's application with hydrogen as a fuel source.

In addition, Hema is engaged with three other companies, one for electrical components, another for wire harnesses and a third for sensors – all of which will be used to enable autonomous trucks.

Further engagements are planned to move forward even more quickly with alternative energy solutions. "The message here is we are not focusing on the one area. We are sending a lot of arrows everywhere," Pey commented. "At the end of the day, we will [hit] the target on a couple of them."