-The ratings outlook for the global automotive sector is increasingly negative for both automakers and their suppliers. This trend will likely continue, given weakened market momentum and no signs of an upturn, S&P Global Ratings said in a report published today on RatingsDirect, titled “Industry Top Trends 2020: Autos.”
|Please read S&P Global Ratings’ report|
|Industry Top Trends 2020: Autos|
We expect no revenue growth for the industry in 2020 and 2021. Any recovery hinges on a potential modest revival of the Chinese market, and would come no earlier than 2021 in our view. Geopolitical tensions including between the U.S. and China, the U.S. and Europe, and the U.S. and EU over Brexit, have added to uncertainties.
Some large players have financial buffers and liquidity that offset these challenges to a certain extent. Globally, approximately one-third of rated automakers and suppliers have negative rating outlooks.
“Fallen angel” risk has increased given higher concentration of ratings in the low ‘BBB’ category. This concerns both automakers and suppliers, and is linked to strategic or operational missteps in responding to regulatory challenges, shifts in consumer preferences and lower global light vehicle sales.
Our key assumptions include
|•||Global light vehicle sales will fall short of 100 million annually–by approximately 8 million in 2020.|
|•||We expect a combination of factors, including intense industry competition, trade disputes, higher production and R&D costs for electrification, and high restructuring costs, to keep margins under pressure for automakers.|
|•||For auto suppliers, declining volumes, intensifying price competition, foreign exchange volatility, rising raw material costs, and restructuring costs will make it harder to meet business plan ambitions over 2019.|
This report does not constitute a rating action.