The Future is Electric: Climate Change and the Global Automotive Sector

Climate change risk already affects the major automotive issuers we rate; essentially all automotive original equipment manufacturers (OEMs) have made substantial investments as they shift to electric vehicle (EV) production and away from internal combustion engine vehicles. In the near term, our outlook for the sector is neutral, with company credit profiles supported by reasonable profitability, robust liquidity positions, and conservative financial postures.

Over the longer term, this EV transition will likely represent a material challenge for global OEMs. Those that are best able to manage the combination of increasing transition investments and regulatory costs, while facing lower EV per-unit profitability, may be able to achieve sustainable market share gains over the longer term. However, others may experience credit risk weakening and possibly negative rating actions.