European Auto ABS Outlook: Changing Lanes

In the advent of new regulations and changing customer behaviour, European automobile markets are transforming, affecting automotive finance. The automotive market is broadly cyclical and the accelerated conclusion of the most recent automotive cycle in Europe can be mainly attributed to the effect of the Coronavirus Disease (COVID-19). However, other structural drivers have also played their part in changing the auto asset-backed securities (ABS) issuance environment. At DBRS Morningstar, we consider there to be five separate factors shaping the ABS market including (1) market saturation, (2) the transition to alternatively fuelled vehicles, (3) dealer and manufacturer consolidation, (4) an increase in the demand for and supply of younger used vehicles, and (5) changing financial products offered to customers as the market continues to shift away from ownership to usage.