Could electric car change the destiny of Türkiye's trade deficit?

Purpose - This study investigates the relationship between the proliferation of electric vehicles in Türkiye and its subsequent effects on oil dependency and the trade deficit of Türkiye. Research design/method/approach - This study employs a frequency domain causality test to investigate the influence of electric vehicle adoption on oil imports and the foreign trade deficit of Türkiye over the 1994-2024 period. Specifically, the research utilizes the Breitung-Candelon frequency domain Granger causality approach, which decomposes causality to explore its effects in the short, medium, and long term. Findings - The frequency domain causality test confirms a long-term causal effect of electric vehicle on Türkiye's oil imports. Conversely, the analysis indicates that the volume of electric vehicles demonstrates no causal relationship with the trade deficit across the short, medium, or long term. Practical implication - The findings of this study demonstrate that the adoption of electric vehicles has the potential to alter Türkiye's oil demand over the long term. However, the prevailing market share and competitive advantage held by Chinese electric vehicle manufacturers pose a substantial risk, potentially leading to the persistence of Türkiye's foreign trade deficit. Originality/Value - While existing literature broadly addresses electric vehicle impacts, this study fills a crucial gap by offering the first empirical analysis, to our knowledge, that specifically investigates the causality between electric vehicle sales volume and Türkiye's key macroeconomic indicators (oil imports and foreign trade deficit) using frequency domain analysis.