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Tax breaks draw foreign investors to Turkey's auto sector - association

* Higher tax breaks announced last month

* Turkey is Europe's biggest light commercial vehicle maker

* Private equity funds seen increasingly interested

By Evren Ballim and Birsen Altayli

ISTANBUL, March 27 (Reuters) - Foreign investors are in talks with scores of Turkish auto parts makers after the government doubled tax breaks on investment in the sector in a bid to boost exports, a senior industry official said.

The investment scheme announced in February, an extension of a programme first launched in 2009, offers tax breaks of up to 60 percent for new investments as well as incentives including deductions on employee costs.

Turkey aims to boost exports to reduce its current account deficit, the country's main economic weakness, and aims to almost quadruple auto industry exports to $75 billion by 2023 - close to a fifth of total exports - from $20 billion last year.

"After the government incentives were introduced, private equity funds have been showing an interest in the automotive parts and components sector," said Mehmet Dudaroglu, Chairman of the Association of Automotive Parts & Components (TAYSAD).

"Foreign funds and strategic investors are in talks with at least 30 firms," he told Reuters in an interview.

The foreign investors who had already shown an interest in the sector were mostly from Europe, where auto demand has been falling, but Chinese, Korean and Russian investors were expected to follow suit, Dudaroglu said.

Turkey's automotive industry, which produces vehicles and parts largely for export, was hit by a weak domestic market and shrinking demand from debt-choked Europe last year, when sales fell 10 percent to 818,000 units and exports dropped 8 percent.

Turkey is Europe's sixth-biggest auto producer and its top manufacturer of light commercial vehicles. European markets account for 70 percent of its auto exports, but it is targeting new markets in the Middle East, Asia and Africa.

According to accounting firm Deloitte, there were 23 merger and acquisition deals in Turkey's auto parts sector between 2002 and 2010, largely involving strategic investors.

Dudaroglu expected more deals and a higher involvement of private equity firms in the future.

Recent deals have included Japan's Sumitomo Rubber Industries agreeing to invest up to $500 million in tyre production in Turkey and German-based automotive supplier Mubea announcing a 20 million euro ($25 mln) factory last year. ($1 = 0.7777 euros) (Writing by Evren Ballim; Editing by Ece Toksabay and Nick Tattersall)