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Monday, 19 October 2020

Moody’s changes global automotive industry outlook from negative to stable

Lower revenue is a burden for companies investing to produce lower-emissions and electrified vehicles, or build more efficient and profitable operating structures

Ahram Online , Wednesday 9 Sep 2020
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Moody’s has changed the outlook for the global automotive industry to stable from negative, saying that the precipitous drop in light vehicle sales as a result of the Covid-19 pandemic appears to be hitting a bottom, with sales expected to jump steeply over the next 12 to 18 months, the credit rating group announced Tuesday.

"The stable outlook for the global automotive industry reflects rising sales through 2021, with continued, but slow, increases through 2023. Nevertheless, auto shipments won't recover to pre-pandemic levels until the middle of the decade,” said Bruce Clark, a Moody's senior vice president.

Clark added that the Covid-19-driven downturn in unit sales is significantly worse than the 2009 decline.

Moody's analysts expect global light vehicle shipments to fall by 19 percent in 2020, to reach 73 million, before rebounding to 80 million in 2021, saying that shipments dropped by 11 percent between 2007 and 2009, before rebounding to record levels in 2010.

Moody's said that the challenges arising from the Covid-19 pandemic and its subsequent induced recession come at the time automakers are contending with costly restructuring and modernisation efforts, which only add risk for an industry with already thin margins.

It added that lower revenue is a burden for companies investing to produce lower-emissions and electrified vehicles, consummate alliances or mergers and build more efficient and profitable operating structures.

Nevertheless, automakers' liquidity is strong, and should be sufficient to see them through current stresses, according to Moody’s.

Global sales of passenger cars are expected to drop to 59.6 million units in 2020, down from 79.6 units recorded in 2017, according to Statista.

The fate of the industry depends on how fast autos production will be ramped up following the pandemic outbreak in the coming period," according to Statista.

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