Fitch Ratings predicts 2% growth in global automotive sector

December 03, 2024 (MLN): Fitch Ratings has reaffirmed a 'neutral' outlook for the global automotive sector, signaling stable production, with light vehicle sales expected to rise by about 2%.

This growth will be unevenly distributed across regions, as European and Chinese markets face macroeconomic challenges. 

"We expect pricing to remain subdued due to escalating competition", Fitch Ratings said in their statement.

Fitch anticipate interest rates to continue dropping in 2025 in all major geographies, albeit slower in the US. 

"We hope that consumers will return to the market with more favorable borrowing rates, particularly once election uncertainties in the US and Germany are resolved", Fitch further added. 

The vehicle mix is likely to change as previously priced-out consumers re-enter the market, adding further pressure on profitability. 

Restructuring the European manufacturing footprint will also put pressure on cashflows.

Fitch looks forward to increasing protectionist policies to complicate ongoing restructuring efforts and add further pressure on the profitability of original equipment manufacturers (OEM). 

Most global OEMs and tier-1 suppliers have localized production, but manufacturing and supply chains in Mexico and Canada could face additional tariffs under Donald Trump’s presidency. 

This would be on top of the tariffs already imposed on US and European Chinese manufacturers.

The growth rate of electric vehicles (EVs) is increasing across geographies but has flattened in the US and Europe due to consumer concerns regarding range and declining residual values from rapid technology adaptation and competition. 

Fintch plan for no significant pickup in EV sales in 2025, as government subsidies and regulations are insufficient to address these concerns.

Further regulatory changes or delays are likely to negatively impact EV adoption in Europe and the US, while the Chinese market continues its steady growth.

Copyright Mettis Link News